There has been much discussion in California, where several local governments have suggested that the power of eminent domain should be used in an attempt to fix the troubled mortgage crisis in the country.
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Everyone can appreciate the fact that there is concern and a desire at all levels to fix this problem, but the use of the sovereign power of eminent domain is not the solution. All that will occur is the creation of more problems. The constitutional right to have and to hold property without the fear of the federal or state government taking it, except in very limited cases, must not be infringed upon. Our constitutional laws, both federal and state, along with eminent domain laws, have been written to guarantee this constitutional right.
In order to take property by eminent domain, the first consideration that must be made by a governmental entity is weighing and balancing of the individual property rights against the public good. The taking must be for a public purpose. That is why, historically, takings have always been used for infrastructure projects -- and that should not change. An infrastructure project benefits the public as a whole and when the governmental authorities balance the right of the property owner against the public good, the scales have to weigh in favor of the public good, provided the property owner is paid just and fair compensation.
What is proposed in California is not for a public benefit. It is nothing short of the government improperly interfering with the rights of property owners. No governmental agency under the guise of eminent domain should attempt to seize mortgages in order to help the economy.
If municipalities wish to purchase mortgages from the mortgage holders, they have the right to do that. That is what free enterprise is about. However, the moment the government seizes mortgages under the guise of eminent domain, it has defeated the constitutional protection afforded to property owners to own property without governmental interference.
The lender, whether it is an individual, a trust, or any other financial institution that gives a mortgage, has a property interest in that mortgage. It has the right to hold it, collect payments on it, sell it and treat it as its property. The taking of these mortgages by eminent domain violates one of the basic tenets that this country was founded upon and brings this country perilously close to a form of government analogous only to communism, where the good of the masses overrides all individual rights.
If governments wish to protect homeowners and negotiate with lenders to buy out the lenders’ interest, they should do so in arm’s length negotiations without the threat of eminent domain. If governmental entities are paying fair value for the mortgage, it is up to the holder of the mortgage to determine whether it wishes to sell or not to sell.
The mere fact that the government says it wants to purchase the mortgages does not give it the right to do so. This is still the United States of America -- the government does not and should not have the right to take property because the owner did not want to sell.
This concept should not be tolerated and if it is challenged in the courts, I predict that even the courts in California, considered by many to be the most liberal in the country, will declare this type of conduct unconstitutional.
John Schepisi is an attorney with Schepisi & McLaughlin, located in Englewood Cliffs, N.J., and New York City.