Bondholders of mortgage loans that Richmond, California, has threatened to seize through eminent domain are asking a federal appeals court to revive their lawsuit against the city.
Bank trustees for investors including BlackRock Inc. (BLK), Pacific Investment Management Co. and DoubleLine Capital LP are appealing U.S. District Judge Charles Breyer’s Sept. 16 ruling tossing the case, Rocky Tsai, an attorney for the banks, said in a filing today in federal court in San Francisco. They’re asking a federal appeals court in San Francisco to review the ruling, according to the filing.
Breyer ruled that the lawsuit had to be dismissed because Richmond city council members hadn’t yet voted to proceed to state court and file an eminent domain case to seize the loans. The trustees’ claims depend on “future events that may never occur,” Breyer said in dismissing the case.
Bank trustees sued in August alleging constitutional violations in Richmond’s plan to use eminent domain to seize more than 600 loans on which the amount owed is more than the value of the property and refinance them to give homeowners built-in equity.
Richmond Mayor Gayle McLaughlin and lawyers for Mortgage Resolution Partners say the plan will prevent foreclosures and blight. Lawyers for the trustees allege that some of the targeted loans are still performing and the plan will harm investors and disrupt the U.S. housing market if it’s allowed to proceed and other communities follow suit.
Mortgage Resolution Partners LLC would provide financing for the plan. McLaughlin didn’t immediately return a call seeking comment.
The cases are Wells Fargo Bank v. City of Richmond, 13-cv-03663, and Bank of New York Mellon v. City of Richmond, 13-cv-03664, U.S. District Court, Northern District of California (San Francisco).
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