Wall Street's largest lobbying group is objecting to the use of eminent domain by municipalities to seize mortgages packaged into bonds so the loans can be shrunk to aid homeowners who owe more than their properties’ values, Bloomberg News reported yesterday. San Bernardino County in California is exploring the strategy along with the cities of Fontana and Ontario there. Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller property-value indexes, supported the approach. Both the investment firm and bank members of the Securities Industry and Financial Markets Association (SIFMA) have concerns based on an agreement approved last week by San Bernardino officials granting the authority to study and create such a program. By using eminent-domain powers, municipalities can force the sale of private property at prices deemed to be fair if doing so serves a public purpose. San Bernardino is exploring the idea because about 150,000 homes, or half of those in the county with a mortgage, are underwater and officials need to try to rescue the housing market, said Greg Devereaux, its chief executive officer. The American Securitization Forum, a separate trade group, is exploring the legality of the proposal.
