Local Principal Reduction Background - Home Defenders League

Local Principal Reduction Background

Local Principal Reduction Background

Using eminent domain as a tool for resetting mortgages, preserving homeownership, and aiding local economies

The housing crisis continues to devastate families, communities, and our economy.

At least 9 million families have lost their homes to foreclosures and Americans have lost 40% of their average household wealth.

Help for struggling homeowners and communities, either from the federal government or from the banks and bankers whose actions created this crisis, has been limited at best. The best solution is resetting mortgage principal for underwater homeowners, which the Home Defenders League and many economists strongly support. But banks resist it at all costs and Fannie Mae and Freddie Mac, who own more than half of all underwater mortgages, block it, and many loan servicing agreements prevent .

With the Department of Justice unwilling to demand accountability from Wall Street criminals who destroyed the economy and stole our houses, wealth, and secure futures, community groups, civic leaders, and elected officials are taking action locally by using eminent domain to reset mortgages, preserve homeownership, and rebuild local economies.

Under this approach, a public authority can take mortgages out of the complicated structures in which they are trapped, pay fair market value for them, and create the conditions in which new sustainable mortgages at current home values can be made – all while keeping homeowners in their homes. This can be done at scale, on a city-by-city basis.

It is no secret that eminent domain has often been used to the detriment of our communities. But this is a way to use it to the tremendous benefit of our communities. Unsurprisingly, Wall Street banks are scared of this and are making ominous threats in their attempt to stop cities from using eminent domain in this way. In order to win, we need to ensure that our elected officials have the community support they need to stand up to the threats of Wall Street bankers. That’s why Home Defenders League members are joining with allied organizations, civic officials, and supportive elected officials to ensure that this common-sense approach to solving the underwater housing crisis in enacted in as many cities as possible.

You can help! Here are some ways to help move this fight forward.

  • Join the growing list of community leaders, cities and towns that are supporting this solution.
  • Sign on to the Statement of Principles.
  • Pass a simple, common sense resolution in your city about achieving mortgage resets for underwater homeowners. The resolution would simply say that:

The City Council directs staff to explore all legal options at the City’s disposal to reset mortgages to fair market value in order to prevent foreclosures and stabilize the housing market, including the use of eminent domain to acquire underwater mortgages and write down the principal on those loans.

For more information you can download this PDF: “Eminent Domain Principles”.

To help build support locally, you can download and use this draft letter as the basis for getting your elected officials to sign on to creating an eminent domain solution to the underwater housing crisis in your city.

Join in! For more information you can contact the Community Wealth Campaign Coordinator, Amy Schur at aschur@calorganize.org.