Seattle Mulls Controversial Foreclosure Fix
The Seattle City Council could move one step closer to using its power of eminent domain as a way to curb foreclosures.
The council is looking to create a committee to explore eminent domain and two other principal reduction programs, namely lease swapping and setting up a municipal land bank, as tools for struggling homeowners.
The solutions were first outlined by Cornell University law professor Robert Hockett, who was hired by the city to make recommendations.
Eminent domain would involve the city taking over underwater mortgages from banks and rewriting them to be more affordable to homeowners. That strategy drew the ire of Wall Street and mortgage giants Freddie Mac and Fannie Mae when officials in Richmond, Calif. said they planned to use it.
Council member Nick Licata is asking the city council to launch an interdepartmental team to look closely at the financial and legal implications of any future program. He said federal programs aren’t always available or effective for homeowners who are underwater.
"If the city is able to come up with a principal reduction strategy, the city will be able to save a number of homes," Licata said.
The city estimates between 24,000 and 42,000 homeowners were underwater on their mortgages in 2012. In Seattle, zip codes 98104, 98106, 98121, 98148, 98168 and 98178 have underwater home mortgage loan concentrations in the 40 percent range—above the national average, which is between 20 and 25 percent.