[ CAF Note: We created a mortgage bubble by fraudulent means. When the bubble burst, we solved the banks problem with fraudulent means at taxpayers expense. Now the question is if and how will we solve the homeowners problem? It is not surprising that proposals would begin to float whereby investors could make money addressing homeowners desire to write down mortgages by defrauding the beneficiaries of the pension and bond funds whose fiduciaries had no business buying the mortgage securities in the first place. Municipalities can legalize fraud if the courts let them. Legalized or not, fraud is fraud. That said, we still need ways to refinance underwater mortgages. I know because I have one!]

By Imran Ghori

Six years after Cathy Piper purchased her 1,100-square-foot Rancho Cucamonga home for $420,000, she has seen its value drop to $232,300.

But like millions of homeowners across the country with underwater mortgages, she struggles to meet her $2,475 monthly mortgage payment even as she is stuck with a loan that is more than the property is worth.

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A Solution for Underwater Mortgages: Eminent Domain
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