[wildbill]

What happens to the legitimate financial interests of the banks who held the notes that led to foreclosure?

The banks will simply be robbed, not with guns, but by pandering politicians who will vote for the confiscation?

Now, the fallout: Banks, as ongoing businesses will be hurt, but the real theft will come from the myriad of stockholders and bondholders who own interests in the banks, many of them just average people who thought a bank stock or bond was a good investment for their retirement.

A further fallout will be a marked decline in mortgages approved. No bank will loan money on a home mortgage unless the collateral and credit rating of the borrower is sufficient to make sure that the bank cannot lose during a foreclosure in the future.

[Lorianne]

Exactly.
But sometimes learning the hard way by experience is the only way. I hope San Bernadino Co goes for this.

[Alberta's Child]

The flip side of this is that there's also the legitimate question of what exactly a bank owns if it holds a "non-performing" $300,000 mortgage (i.e., a foreclosed home) on a property that can only fetch $200,000 on the open market. If a municipality exercises its eminent domain powers and seizes this home from a bank for its fair market value, then there's a possibility -- from a strictly legal standpoint -- that it's not really doing anything wrong.

In some cases where the bank is continuing to pay property taxes on foreclosed homes and maintain them, a municipality that takes homes off the bank's hands may actually be doing the bank a huge favor.