Mayor Rahm Emanuel said Tuesday that he does not support the idea of using eminent domain to seize underwater homes and then refinance those mortgages to more affordable terms.
He made the statement as Chicago aldermen were in a committee hearing trying to understand the proposal floated by a California firm.
"I don't think it's the right way to address the problem," Emanuel told reporters when asked about the idea during an unrelated news conference. "I think there are other places to do it. I don't think it's the power of the city to do, to deal with the housing issue. We have a national issue. I think we have to address the issue. I just don't think that's the right instrument."
The concept of using eminent domain to help solve the nation's housing crisis surfaced in San Bernardino County, Calif., and it has since been taken up for discussion in several municipalities. Chicago Ald. Edward Burke called for a hearing of the Joint Committee of the Committee on Finance and Committee on Housing and Real Estate to consider whether Chicago should delve deeper into the idea.
Last week, the Federal Housing Finance Agency, the conservator of Fannie Mae and Freddie Mac, said it had "significant concerns" about any use of eminent domain to help underwater homeowners.
Despite assurances from Mortgage Resolution Partners, the investment company behind the proposal, that any eminent domain proposal could be tailored to the municipality, aldermen at Tuesday's hearing voiced several concerns about whether this was the best way to tackle the city's ongoing housing crisis.
According to the Woodstock Institute, one out of every four homes in Cook County is underwater, meaning the homeowner owes more on the loan than the property is worth. In Chicago, 100,000 borrowers are underwater, including 40 percent of homes in primarily African-American neighborhoods and 38 percent in primarily Latino neighborhoods. Twelve percent of mortgages in primarily white communities are underwater.
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