California Community Considers Bold Response To Foreclosure Crisis

"Gregory Devereaux is the chief executive of San Bernardino County and its 2 million residents. At his urging, local authorities are considering a proposal that would allow local governments to exercise their power to seize private property without landowners' consent in a dramatic -- some say radical -- new way.

Governments usually use this power, known as eminent domain, to acquire private land for public purposes, such as roads or utility lines. But this plan, proposed by a San Francisco-based venture fund Mortgage Resolution Partners, calls for government authorities to seize the mortgages of underwater borrowers, paying the investors that own them a fraction of what they are owed, using money borrowed from the fund. Homeowners could then refinance with a federal loan at a much lower rate, based on what their home is actually worth instead of what they owe.

Supporters say the plan would send a supercharged bolt of energy into the housing market, spurring economic development and preventing even more of the foreclosures that have wrecked many communities. "