The city will never hold the mortgages.  They are simply going to assist them with refinancing elsewhere without ever having to pay off (in full) the mortgage they have now.  I don't think this plan will actually work.  I don't think eminent domain is appropriate here, and I do not think the court will allow this either.

Of course, if the current lenders want to get out of the loans for less than they are owed, nothing would prevent them from voluntarily going along with the city. But, I don't see that happening much.

Best,
Robert A. Franco
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