Banks sue City of Richmond over eminent domain plan

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A worker removes furniture from a foreclosed home before the start of a bus tour of foreclosed and blighted properties on July 13, 2012 in Richmond, California. Members of the group Alliance of Californians for Community Empowerment (ACCE) joined city officials and Richmond mayor Gayle McLaughlin on a bus tour to view foreclosed properties in neighborhoods in Richmond that have been hit the hardest by foreclosures.

Richmond is still struggling with underwater mortgages and foreclosed homes, so city officials came up with a plan to use eminent domain to seize the mortgages and reduce the amount still owed by homeowners. Now some major banks are suing the city, arguing that the plan is unconstitutional.

Late last month we told you about the Bay Area city of Richmond, a typical blue collar town hit hard by the housing crisis.

Richmond is still struggling with underwater mortgages and foreclosed homes, so city officials came up with a plan to use eminent domain to seize the mortgages and reduce the amount still owed by homeowners.

Now some major banks are suing the city, arguing that the plan is unconstitutional. Nick Timiraos, real estate reporter for the Wall Street Journal, joins the show with more.