Seizing Mortgages – Richmond Fails to Get Supermajority Vote

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The Richmond City Council has failed to obtain the supermajority of votes needed to enact its eminent domain plan to seize underwater mortgages. California eminent domain law requires five of the seven members of a city council to approve a measure to use eminent domain. Richmond could not obtain the five required votes to proceed.

The city is not quitting, however. It is continuing its pursuit to help homeowners suffering from underwater mortgages. But to do so, the City is now looking to partner with other communities to form a joint powers authority (JPA). A JPA only requires four votes of city council members to be formed. Given the less strict standard, Richmond City Council was able to obtain the four votes necessary to create a JPA.

JPAs are permitted under Section 6502 of the California State Government Code. It states, “two or more public agencies by agreement may jointly exercise any power common to the contracting parties ….” The JPA would then become the body that acquires the loans through eminent domain and would include other California jurisdictions interested in Richmond’s eminent domain plan.

No other California jurisdiction has joined the JPA, and it is unclear if any will do so. But, the Mayor of Richmond has said that San Francisco, San Pablo, Vallejo and Antioch are examining the plan.

At this point, Richmond is still attempting to work with servicers and trustees of the loans in an attempt to purchase the loans. The servicers and trustees have been unwilling to work with Richmond, which may leave the city with no choice but to seize the loans.

The Mayor is continuing to meet with other city officials to form partnerships in the JPA and is hoping to begin the city’s plan in the next few months. Until other cities join the JPA, Richmond will not initiate its plan. We will follow the Richmond plan’s progress and provide updates on this blog.

If you have questions about this blog post, please contact Attorney Streck at sstreck@axley.com or 608.283.6723.

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