Judge says foreclosure lawsuit vs. Richmond should not be heard now

Reuters News
Posted: Sep 12, 2013 1:29 PM
Judge says foreclosure lawsuit vs. Richmond should not be heard now

By Jim Christie and Dan Levine

SAN FRANCISCO (Reuters) - A U.S. judge on Thursday said a lawsuit to stop the city of Richmond, California's plan to potentially use eminent domain on foreclosed properties should not be heard at this time.

At a hearing in a San Francisco federal court, U.S. District Judge Charles Breyer said he had not made up his mind on whether the mortgage industry would ultimately prevail on its lawsuit, just that he should not address that question until the city actually decides to use eminent domain on underwater mortgages.

"I don't believe it's ripe for determination," Breyer said.

Investors holding mortgages at issue in Richmond sued the city through their trustees Wells Fargo & Co, Deutsche Bank AG and The Bank of New York Mellon in federal court to block the plan crafted by investor group Mortgage Resolution Partners (MRP) for the city, which they say has no precedent and relies on them swallowing losses.

Richmond's city council voted 4 to 3 on Wednesday for Mayor Gayle McLaughlin's proposal for city staff to work more closely with MRP to put the plan to work.

The proposal directs city staff to work with other local governments interested in the plan and calls for city staff and MRP to resolve legal issues. The proposal also confirms the city council would need to vote to seize mortgages by eminent domain. That would require a supermajority vote of the council.

Breyer said he would rule by Monday on whether the lawsuit should be dismissed now, or put on hold.

The case in U.S. District Court, Northern District of California are Wells Fargo Bank, National Association, as Trustee, et. al. v. City of Richmond, California and Mortgage Resolution Partners Llc, Case No. CV-13-3663.

(Reporting By Jim Christie and Dan Levine; Editing by Bernard Orr)