The practical problem with San Bernardino County using eminent domain to acquire mortgages.

Joe Nocera writes about Housings Last Chance?

As for fair value, since the home has dropped dramatically in value, the mortgage is worth a lot less than its face value. On Wall Street, in fact, traders are buying securitized mortgage bonds at a steep discount — reflecting the true value of the mortgages they’re buying. Yet the homeowner remains saddled with a mortgage that is unrealistically high. The plan calls for the county to buy mortgages at a steep, but fair, discount to its face value, and then to offer the homeowner a new mortgage that reflects much, though not all, of that discount. (Fees and costs would be paid for by the spread.) The money to buy the mortgages would come from investors; indeed, Mortgage Resolution Partners is in the process of raising money...

But if the county effectively originates mortgages that are more valuable than the amount it pays to investors in eminent domain proceedings, it is hard to see how it is paying fair value.  I don't know how this works without the county losing money--the value of what the county buys has to be equal to the value of what it sells, but it will also be taking on a bunch of fees, legal and otherwise.

If the threat of eminent domain gets lenders to modify more loans, the threat could produce a better outcome.  But eminent domain itself...