San Bernardino County and two of it's cities have a new interpretation on Kelo vs. New London. They are working on a plan to use eminent domain to take over homes with underwater mortgages. Once they have removed the property from the bank that owns it, they will re-assess the value and re-sell it to the underwater homeowner.
The plan is supposed to go like this, say someone bought a house for $500k in 2007 and it's only valued at $200k now. The county will use eminent domain to take it from the bank, re-assess it at $225k and allow the homeowner to apply for a new bank loan to buy it back from the county. The extra $25 thousand will go to the county or city (Ontario and Fontana cities are considering this, too) for their trouble. And they only plan to do this on houses where the owners are not behind in their payments. WTF?
See, everybody will be happy, right? Well, except the nasty old bankers who originally financed the home. And their investors. And anyone hoping to get a loan in that county or city. But who cares about them?
What could possibly go wrong?
And after reading about that I saw this. The city of San Bernardino is declaring bankruptcy. It is the second largest city in the country to declare bankruptcy and the largest city in San Bernardino county. Perhaps the county should have taken them over before they got so far behind and given their new plan a tryout..
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