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California Cities May Soon Snub the Constitution by Seizing Underwater Mortgages an Overview by Sacramento Property Rights Lawyers

Kelo HouseFor many in California the 2008 housing crisis never ended. Currently, thousands of California homeowners are behind or struggling to make mortgage payments on homes that simply are not worth what they agreed to pay when they took out their mortgage. To accommodate these unfortunate circumstances, a distressing number of California cities are now contemplating a “creative” solution to the problem. The cities of El Monte, Baldwin Park, Richmond, and Pomona are considering (or have considered) seizing these properties through the power of eminent domain, and then selling the homes back to the struggling homeowners at a reduced mortgage rate.

Such a move is wholly unprecedented and likely unconstitutional. The Fifth Amendment to the United States Constitution provides that private property may only be taken if the owner is compensated and the taking is for a “public use.”  Historically, the term public use has limited government takings to projects like public roads, public parks, and post offices–i.e. things that are actually used and owned by the public. The idea that the government could take private property from one individual and give it to another private individual was thoroughly rejected by U.S. Courts as early as 1798.

However, in recent years the Supreme Court has called that long standing tradition into question. In Kelo v. New London, in 2005 the Court upheld the seizure and transfer of Suzette Kelo’s private home to a private developer by the City’s redevelopment agency.  In a sharply divided 5-4 opinion the Court held that because the properties taken were “blighted” and the transfer was part of the city’s larger redevelopment plan for the area, the taking served a public “purpose” and was therefore permissible under the Fifth Amendment.

The Court’s ruling caused an immediate backlash. States around the country, quickly enacted statutes to shore up property rights for their citizens.  Thus, while Kelo still remains on the books for federal purposes, its ultimate effect on the takings clause remains unclear.

One thing is certain however, not even Kelo approved the transfer of property from a property owner to a private individual for that private individuals’ benefit. Nor could it. As the Supreme Court explained long ago “To lay with one hand the power of the government on the property of the citizen, and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes, is none the less a robbery because it is done under the forms of law.”

That is precisely what these California Cities’ mortgage seizing plan amounts to.  To seize privately held mortgages and transfer them to private individuals for the sole purpose of aiding those private individuals’ finances is “robbery” pure and simple.

The Los Angeles and Sacramento property rights lawyers are dedicated to obtaining favorable results for clients who have had their Constitutional property rights violated. To speak with a property rights attorney, call 877-770-7379 to have your legal matter assessed by a team of experienced property rights lawyer.


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