NJ Mayor using eminent domain to bailout homeowners in foreclosure

Source: North Jersey

Using eminent domain to bail out underwater homeowners won't fix all Irvington's problems, but Mayor Wayne Smith thinks anything that can help some residents of his economically struggling township is worth trying.
"It's not a panacea," Smith said. "But it looks like it could help some people."
Irvington is the second municipality in the country to declare its intent to use eminent domain to purchase homes in foreclosure, behind Richmond, Calif. Support for the tactic is gaining traction nationwide in municipalities besieged by foreclosures. Irvington's neighbor Newark, as well as Brockton, Mass., Chicago, and Yonkers, N.Y., have floated or are studying the idea.
But the practice, which gives municipalities the power to circumvent mortgage contracts, acquire loans from bondholders, write them down and give them back to the bondholders, is controversial. It has drawn zealous opposition from Wall Street, real estate groups and some in Washington.
According to Cornell University law professor Robert C. Hockett, who helped devise the plan, eminent domain works because only government has the power to forcibly sidestep mortgage contracts.
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