Eminent Domain – Eminent Disaster

Eminent domain laws are laws that allow cities, states, and government entities to seize properties for the public good. Sometimes expanding highways or commuter rail systems requires knocking down buildings to pave the way for progress, but these laws are being abused for a completely different purpose.

A plan to help some California homeowners to get out from under the debt load of their underwater mortgages is designed to use eminent domain to allow the government to take properties from real estate investors, after which it will sell the home back to the original owner in a restructured agreement. For some single family homes this may be reasonable, but due to the nature of eminent domain, participation is not optional.

The investors are stuck with losses on mortgage right downs while borrowers get off free and clear. This clearly would not end well for everyone involved.

Because this is not the intended use of eminent domain and is not for the good of the entire public, only a select few, the plans are being challenged based on a 2005 Supreme Court case stating that eminent domain must be for the public use of the area, and seizing property violates the Fifth Amendment.

This is a site about real estate, not Constitutional law, but we can clearly see the problems this may have in the real estate market. Rather than thinker with people’s homes and mortgages, maybe the government should let the real estate community solve the problem.

Read the original story at Housing Wire.

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