A proposal under consideration in San Bernardino County, Calif., to use eminent domain to take over negative-equity properties at the expense of private-label mortgage-backed securities investors doesn’t serve a public purpose as required by the state constitution and the U.S. Supreme Court, according to legal experts. One appeals attorney argues that the proposed program can only work if the private investors pushing the program extract profits from the mortgages. So instead of taking property for public purposes, as required in the state constitution, any public benefits are only incidental. He also explained that the U.S. Supreme Court has made it clear eminent domain must be utilized only for a public purpose, while the proposal was designed to profit the investor organization.
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