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BlackRock Inc.’s request with other bondholders for a court order to block a plan by Richmond, Calif., to take over underwater mortgages through eminent domain is “not ripe,” a federal judge said while declining for now to issue an injunction against the city, Bloomberg News reported yesterday. U.S. District Judge Charles Breyer said during a hearing yesterday that the bank trustees for the bondholders could renew their request for an injunction if Richmond’s city council votes to begin seizing the loans. While lawyers for the trustees argued that such a vote is just “ministerial” and the city is “committed” to implement the plan, Judge Breyer said that courts shouldn’t “jump in” before other steps are completed to allow seizure of the loans.

BlackRock Inc., Pacific Investment Management Co., DoubleLine Capital LP and other bondholders are asking a court to block a proposal by the city of Richmond, Calif., to seize underwater mortgages through eminent domain, Bloomberg News reported today. With this week’s vote by Richmond’s city council to press ahead with an effort that its mayor claims will help homeowners avoid foreclosure and fend off blight, the dispute between the northern California oil refinery town and Wall Street moves today to a federal courthouse in San Francisco. U.S. District Judge Charles Breyer is scheduled to hear arguments from both sides on whether to order the city to halt its efforts to use eminent domain to take over loans. He will also consider the city’s request to find that the bondholders went to court prematurely and to dismiss their claims because the city council hasn’t yet approved the plan.

A rise in interest rates is slamming homeowners' demand for mortgages, prompting large and midsize banks to cut jobs and warn investors of declining profitability in the home-loan business, the Wall Street Journal reported today. Wells Fargo & Co., the nation's largest mortgage company by loan value, on Monday told investors at a conference that it expects mortgage originations to drop nearly 30 percent in the third quarter to roughly $80 billion, down from $112 billion in the second quarter. JPMorgan Chase & Co., the largest U.S. bank as measured by assets, said during the conference sponsored by Barclays PLC that it expects to lose money on its mortgage-origination business in the second half of the year. On Aug. 29, Bank of America Corp., notified about 2,100 employees that they were being let go largely due to a decline in refinancing activity. Rates are rising on investor worries the Federal Reserve soon will take steps toward reducing an $85-billion-a-month bond-buying program designed to help stimulate the economy.

Federal officials are preparing to reduce the maximum size of home-mortgage loans eligible for backing by Fannie Mae and Freddie Mac, a move that is likely to face resistance from some lawmakers in Congress and the real estate industry, the Wall Street Journal reported today. The proposed move is designed to wean the mortgage market off government support and allow the market for non-government-guaranteed mortgages to take a bigger role. But critics argue that any such move will shrink the pool of eligible home buyers, stunting the nation's housing recovery. Currently, Fannie and Freddie Mac can back mortgages that have balances as high as $417,000 in most parts of the country and up to $625,500 in expensive housing markets, including parts of California and New York, and as much as $721,050 in Hawaii. The Federal Housing Finance Agency, which regulates Fannie and Freddie, hasn't announced how far it will drop the loan limits, which would take effect Jan. 1, 2014. But in a statement, the agency said a "gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayers' mortgage-risk exposure…and expanding the role of private capital in mortgage finance."

After a slight dip a week ago, mortgage rates have bounced back, according to the latest data released by Freddie Mac, The Washington Post reported yesterday. The 30-year fixed-rate average rebounded to near its two-year high, rising to 4.57 percent with an average 0.7 point. It was up from 4.51 percent a week ago. The 30-year fixed rate reached its highest level since July 2011, 4.58 percent, two weeks ago. It has remained above 4.5 percent for three weeks. The 15-year fixed-rate average also hovered near its two-year high, increasing to 3.59 percent with an average 0.7 point. It was 3.54 percent a week ago and 2.86 percent a year ago. The 15-year fixed rate hit its highest level since July 2011, 3.6 percent, two weeks ago. It has stayed above 3 percent since early June. Meanwhile, mortgage applications, which had been declining as interest rates rose, saw an uptick this week, according to the latest data from the Mortgage Bankers Association. The Market Composite Index, a measure of total loan application volume, climbed 1.3 percent from the previous week. The Refinance Index increased 2 percent, while the Purchase Index was down 0.4 percent. After sinking to its lowest level since April 2011, the refinance share of mortgage activity showed gains, rising to 61 percent of total applications, up from 60 percent a week ago. Read more (free subscription required).

A U.S. housing regulator is seeking at least $6 billion from JPMorgan Chase & Co. to settle civil claims the bank sold bad mortgage bonds to government-backed finance companies Fannie Mae and Freddie Mac, Bloomberg News reported yesterday. The lawsuit is scheduled to go to trial in June, according to a filing in federal court in Manhattan. The FHFA sued JPMorgan and 17 other banks over faulty mortgage bonds two years ago in an effort to recoup some of the losses taxpayers were forced to cover when the government took over the failing mortgage finance companies in 2008. Fannie Mae and Freddie Mac, which are regulated by FHFA, have taken $187.5 billion in federal aid since then.

A New York state judge has ordered JPMorgan Chase & Co. to pay the billionaire Leonard Blavatnik $42.5 million plus interest, finding the bank liable for breach of contract after it was accused of mismanaging an investment account by betting on risky mortgage securities, Reuters reported yesterday. In a decision made public on yesterday, New York State Supreme Court Justice Melvin Schweitzer also said the largest U.S. bank was not liable on a negligence claim. Blavatnik had sought to recover more than $100 million that he said the bank lost on his original investment of roughly $1 billion.

Standard & Poor’s probably will demand greater protections for investors when mortgage bonds are backed by loans to homeowners in jurisdictions that use eminent domain to seize debt to help borrowers, Bloomberg News reported yesterday. The use of eminent domain, such as is being contemplated by Richmond, Calif., would create an “additional risk of default,” as well as require different assumptions on the size of per-loan losses, S&P analysts James Taylor and Sharif Mahdavian said yesterday. The ratings firm would likely require more credit support, or protection such as some classes of deals taking losses before others, they wrote. Richmond is furthest along in considering using its eminent domain powers in such a way, which is being advocated by Mortgage Resolution Partners LLC and studied by about a dozen municipalities, according to data compiled by Bloomberg. S&P’s statement on its potential reaction if the effort progresses follows the ratings company’s response in 2003 to a predatory-lending law in Georgia with a refusal to grade bonds with home loans in the state.

Mortgage Electronic Registration Systems Inc. won dismissal of a lawsuit brought by Minnesota’s Ramsey and Hennepin counties over claims the use of MERS to avoid paying mortgage-assignment filing fees violates state law, Bloomberg News reported today. U.S. District Judge David S. Doty in Minneapolis threw out the counties’ complaint today, ruling that state law doesn’t require all transactions be recorded and only mandates what happens if they aren’t. The applicable law says in part, “every conveyance of real estate shall be recorded in the office of the county recorder of the county where such real estate is situated; and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any part thereof, whose conveyance is first duly recorded.” “Nothing in the statute suggests — either through text or punctuation — that the phrase shall be recorded is to be divorced from the surrounding text,” the judge said. MERS, a unit of co-defendant Merscorp Holdings Inc., files mortgages as the lenders’ assignees or nominees to eliminate the need to record assignments of the notes securing those loans when they’re sold. Ramsey County, home of Minnesota’s capital city of St. Paul, and Hennepin county, site of the state’s most populous city, Minneapolis, filed the lawsuit in February on behalf of all the state’s counties. They alleged the failure to make those assignments public created a public nuisance by concealing the identity of those who holding a financial stake in a property and deprived the counties of filing fees for each transaction of about $46.

James McGown, the bar owner, restaurateur and real estate developer who has left a trail of bankruptcy petitions across New York in recent years, has taken a legal hit, and a judge on Thursday denied his request for an injunction that would have stopped his landlord from terminating his lease and evicting him from Brooklyn's oldest bar, Crains New York Business reported on Saturday. Earlier this year, McGown filed for chapter 11 protection for P.J. Hanley's and initially said that he would be auctioning off the business, but eventually rebranded the bar as Goldenrod. As part of the rebranding, he reportedly renovated the space into an 1890s revival alehouse. However, according to legal documents filed by his landlord, McGown did not have permission to make changes or modifications, nor did he obtain the correct permits for such construction. The ruling allows the legal team for the Hanley family to move forward with lease-termination proceedings and eventual eviction. This new lawsuit is just one in a string for McGown, who recently filed six bankruptcy petitions on his business ventures over the last four years.