She said she fears homeowners will begin to abandon their homes, leading to blighted neighborhoods and the draining of public coffers to the point of municipal bankruptcy experienced by Stockton, Calif., and Detroit.
"The city is stepping in where Wall Street and where the federal government have been unable or unwilling to do so," she said.
Federal regulators said eminent domain isn't the answer. The Federal Housing Finance Agency said plans to seize loans "present a clear threat to the safe and sound operations Fannie Mae, Freddie Mac and the Federal Home Loan Banks."
Tim Cameron, a Washington, D.C., lobbyist with the Securities Industry and Financial Markets Association, said there is more at play than a single person's underwater loan.
Cameron said pension funds, banks and other groups that made loans in Richmond stand to lose millions if the city is allowed to use eminent domain to force lenders into accepting less than the original terms of the loan.
He also predicted that cities using eminent domain will make lenders wary of doing business there.
"There's a domino effect in play here," he said.
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