A San Francisco-based firm spent the morning trying to sell the Chicago City Council on the idea that they can use eminent domain to seize properties in danger of falling into foreclosure. The firm argued that the use of eminent domain, which occurs when government acquires private property in the name of the greater good, could lead to the public benefit of fewer foreclosures. Representatives from Mortgage Resolution Partners LLC had the ear of Ald. Ed Burke (14th), chairman of the City Council Finance Committee, and the backing of Ald. Ray Suarez (31st), head of the Housing and Real Estate Committee.
But the effort was perhaps futile as Chicago Mayor Rahm Emanuel indicated at a press conference today that he opposes the plan.
According to the Chicago Tribune, Emanuel said that he did not think eminent domain was the “right instrument” to combat foreclosures.
It is not clear if mayoral opposition alone will torpedo a plan that Mortgage Resolutions Partners has also pitched to San Bernadino, California and New York City.
Under the proposal, the city of Chicago would identify homeowners whose mortgages are “underwater”, meaning the homeowner owes more in outstanding payments than the value of the property. The city would then use its eminent domain authority to acquire the properties at their appraised market value. Next, the city would refinance the mortgage, thereby reducing the mortgage principal.
Mortgage Resolutions Partners CEO Graham Williams provided a city council panel with an example of a home now worth $200,000 that was valued at $300,000 when purchased. The city would acquire the property and write down the principal to reflect the $200,000 current value. The homeowner would then make their new, and reduced, mortgage payments to the City of Chicago.
Mortgage Resolution Partners said they would advise the city each step of the way – and earn a fee for each mortgage placed in eminent domain. Aware of their role as outsiders from California, firm representatives continually stressed that they were “presenting a program” for the city and that the Chicago City Council would formulate program details.
In introducing a resolution today to consider implementation of such a program, Burke argued that eminent domain could address some of the 667,000 Chicago-area homes that were underwater as of March. Burke said the city “should explore every possible avenue to keep families in their homes.”
Suarez said use of eminent domain could help “keep people in communities.” Ald. Richard Mell (33rd) suggested the use of eminent domain “on a broad range of troubled properties.”
Ironically, it was Ald. Robert Fioretti (2nd), often a rare voice of dissent against the mayor, who voiced Emanuel’s concerns. “There is a time and place for eminent domain and this is not it,” said Fioretti, noting that he has worked as an attorney on multiple eminent domain cases, including construction of the United Center.
Fioretti warned that the city council “cannot let the frustration we have” about the foreclosure crisis “get the better of us.”
Eminent domain is one of a few partial solutions pushed in the last couple of months. Cook County President Toni Preckwinkle and Commissioner Bridget Gainer want to establish a county land bank to takeover vacant, foreclosed properties. And city residents have formed a Chicago Anti-Eviction Campaign that calls for a foreclosure moratorium in Cook County.