Should an Eminent Domain Property Taking Be Allowed to Cause a Mortgage Default and Possibly Bankruptcy?
Journal of Real Estate Practice and Education, July 2012
23 Pages Posted: 28 Aug 2012
Date Written: August 26, 2012
This case exposes students to the ethical and legal issues property owners face during eminent domain proceedings in an environment of downward spiraling housing prices (see Exhibit 1 - Federal Housing Finance Agency US house prices index). To date, current federal and state eminent domain laws have no provisions for situations where property owners are significantly underwater on their mortgages. The potential outcome is an otherwise financially variable loan holder being saddled with a large deficiency judgment, possibly needing to file for bankruptcy protection.
Keywords: eminent domain, underwater mortgages, foreclosure, bankruptcy
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