One of every two mortgage holders in San Bernardino County, California owes more on their home than it is worth. With that in mind, the county has proposed a novel way to jump over Wall Street hurdles: It wants to use eminent domain to seize mortgages and boost the local economy.
Median house prices in the county increased 156 percent from the beginning of 2002 until their peak in August 2006, then dropped 58 percent. In many inland areas of California, house price declines have been even more dramatic.
Hit hard by the foreclosure crisis and a substantial decrease in property taxes, the city of San Bernardino’s deficit reached $45.8 million this summer, which caused it to file for bankruptcy. San Bernardino’s problems are by no means isolated, and other municipalities are looking with interest at the eminent domain issue.
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Nela Richardson is an economic analyst with Bloomberg Government. Nela was a research economist at the Commodity Futures Trading Commission before joining Bloomberg. She was also a senior economist at Freddie Mac, a researcher at Harvard’s Joint Center for Housing Studies, and an adjunct professor of finance at John Hopkins. Richardson has a Ph.D. in economics from the University of Maryland, a M.A. from the University of Pennsylvania, and a B.A. from Indiana University.