Wells Fargo and Deutsche Bank have appealed dismissal of their legal challenge to the city of Richmond’s plan to employ eminent domain to take acquire “underwater” home mortgages and refinance them to the benefit of borrowers.
The banks last week filed an appeal in the 9th U.S. Circuit Court of Appeals, to challenge U.S. District Judge Charles Breyer’s dimissal of their lawsuit.
Breyer tossed the lawsuit in September saying the city council had not taken any steps to actually use eminent domain authority on any specific home mortgage, so the banks’ lawsuit was premature.
He told them to come back when the city actually tries to use its power and there is some money to fight about.
The lawsuit was filed by Wells Fargo Bank and Deutsche Bank against the city.
The banks say the proposed city action would violate U.S. and state constitutions on the takings clause and contracts clause. They want an injunction to block the city from making the move to seize loans and refinance houses at lower values.
Richmond, a blue collar town on the northeast rim of San Francisco Bay, was hard hit by the mortgage crisis in 2008, with many of its homes worth less than the mortgage debt still owed on them. The city came up with a unique proposal to use eminent domain to take over the mortgages and refinance them for the borrowers at lower amounts, to reflect current value and give the residents equity in their homes.
But the banks would take the financial hit and they have cried foul.
Case: Wells Fargo Bank v. City of Richmond, No. 13-17080
Defendant’s Motion to Dismiss: No. 13-cv-3663CRB