Realtors, Banks Warn Plan To Seize Distressed Homes May Backfire
SAN BERNARDINO (CBS) — A controversial plan to help struggling homeowners in the Inland Empire by invoking eminent domain in order to rescue distress properties was under fire on Friday.
Local officials in cities throughout San Bernardino County along with Fontana and Ontario are considering a proposal to prevent borrowers from defaulting on their mortgages by seizing their properties for below-market value.
The property would then be refinanced through a new lender at a lower rate and still allow borrowers who have kept up with their payments to remain in their home.
“It’ll be a way for them to either stay in their homes or be able to sell their properties, which they can’t do now,” said San Bernardino County spokesman David Wert.
Over half of all borrowers in the Inland Empire are considered “underwater”, meaning they owe more on their houses than the property is worth, according to housing analyst Zillow.com.
But some local realtors, investors and bank officials fear the move may serve only to further drive down property values.
“With this program, what you essentially have is a municipality that’s creating a food bank program for people who can already feed themselves,” said Steve Manos of the Inland Valley Association Of Realtors.
Critics also warn banks who are concerned of future value losses could stop writing mortgages in the county.
While Wert acknowledged those fears may not be entirely unfounded, he said officials are obligated to at least consider the proposal.
“The county hasn’t decided whether this is a good idea, it could be a horrible idea, we don’t know yet,” he said. “The way that the government finds out whether something is worth moving forward on is we have a public discussion.”
If successful, the plan could also be considered in neighboring counties like Los Angeles, where nearly 1 in 3 homeowners is considered underwater.