Saint Louis University Public Law Review


The burst of the housing bubble brought challenges for many homeowners, as the value of their homes spiraled downward and many were forced into foreclosure. This, in turn, has caused difficulties for cities, as the vacant and abandoned neighborhoods have become a hub for blight and transience, and the tax base has steadily declined. In an effort to combat these issues, Richmond, California’s mayor, Gayle McLaughlin, has teamed up with Mortgage Resolution Partners, LLC. The pair plans to use Richmond’s power of eminent domain to “take” underwater mortgages and then refinance them, selling the new mortgages to investors. The plan, however, has met staunch resistance from many, including banks, which represent the current mortgage holders, as well as the Federal Housing Finance Agency, which challenges the wisdom and legality of such a plan. In the battle that has ensued, both sides are standing strong. The opponents are especially worried that a victory for McLaughlin could spur other cities into action, resulting in huge losses for investors. This article posits that while Richmond’s plan is bold and likely has legitimate intentions, its constitutionality is questionable and its implementation could bring about catastrophic results.

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