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Eminent Domain Debate for Mortgages Revived by Fed Paper

A report by a visiting professor at the New York Federal Reserve is reviving the debate over using government powers of eminent domain to seize mortgages of underwater homeowners to ease their debt.

Eminent domain, which traditionally has been used by local governments to seize blighted property or other land for public good, may reduce foreclosures by helping borrowers who owe more than their homes are worth, Robert Hockett, a professor of financial law at Cornell University, said in the report, published June 9. The study may spur municipalities to reconsider the proposal after it was dropped last year, said Jaret Seiberg, an analyst at Guggenheim Securities LLC.