San Bernardino Eminent Domain Fight Closely Watched By Other Struggling Communities

SAN BERNARDINO, Calif. — This old railroad town in the heart of the Southern California foreclosure belt doesn’t attract many visitors these days, especially not in the blazing summer heat. Yet on a recent Thursday morning, a handful of well-heeled business travelers from the East Coast hurried along a sidewalk to address a government official they have come to know well.

Gregory Devereaux is the chief executive of San Bernardino County and its 2 million residents. At his urging, local authorities are considering a proposal that would allow local governments to exercise their power to seize private property without landowners’ consent in a dramatic — some say radical — new way.

Governments usually use this power, known as eminent domain, to acquire private land for public purposes, such as roads or utility lines. But this plan, proposed by a San Francisco-based venture fund Mortgage Resolution Partners, calls for government authorities to seize the mortgages of underwater borrowers, paying the investors that own them a fraction of what they are owed, using money borrowed from the fund. Homeowners could then refinance with a federal loan at a much lower rate, based on what their home is actually worth instead of what they owe.

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