Richmond mayor and a group of activists and homeowners went to the Wells Fargo Bank headquarters earlier this month and wanted to speak with the company’s chief executive. The group asked the bank to drop the lawsuit aimed at preventing Richmond’s plan to use the government’s constitutional power of eminent domain to seize mortgages from Wells Fargo and other financial institutions.
Mayor Gayle McLaughlin and his group were approaching the bank building when security guards locked the doors. When a bank official told her that there would be no meeting, she grabbed a bullhorn and declared that she was not backing down.
Wells Fargo, three other banks and the Federal Housing Finance Agency don’t think so. They filed two lawsuits claiming the plan is illegal abuse of eminent domain that allows governments to seize private property for public use, such as a piece of land for a new park or a house in the path of a road or highway.
The banks said that the plan would disrupt the United States mortgage industry because other cities would use the same program to help homeowners who owe more on their mortgages than the value of their homes. Richmond has sent out more than 600 offers but has not started any eminent domain proceedings. According to Wells Fargo’s lawsuit, Newark, New Jersey, North Las Vegas, Nevada, Seattle, and El Monte, California have similar plans.
Richmond is offering $150,000 for a $300,000 bank loan on a house worth $200,000 and in danger of foreclosure. If the bank agrees, Richmond will get the loan at $150,000 then it will offer the homeowner a new loan of $190,000. When accepted, the monthly payments are lowered and improve the owners’ chances of avoiding foreclosure. If the bank refuses, the city will invoke the power of eminent domain and seize the mortgage. It would offer the bank a fair market price for the property.