This sounds like it could work apart from the "cooked up by a bunch of businessmen and ex-venture capitalists," which is like saying a bunch of donut shop owners have come up with a cure for obesity.
This would also require local governments be immune to the bribes or threats to from the wealthy who would rather see the rest of us complete our slide into Third World abject poverty. So far, too few politicians at all levels have been immune to that temptation or coercion to make a difference.
Under the proposal, towns would essentially be seizing and condemning the man-made mess resulting from the housing bubble. Cooked up by a small group of businessmen and ex-venture capitalists, the audacious idea falls under the category of "Thatís so crazy, it just might work!" One of the planís originators described it to me as a "four-bank pool shot."
Hereís how the New York Times described it in an article from earlier this week entitled, "California County Weighs Drastic Plan to Aid Homeowners":
Desperate for a way out of a housing collapse that has crippled the region, officials in San Bernardino County Ö are exploring a drastic option ó using eminent domain to buy up mortgages for homes that are underwater.
Then, the idea goes, the county could cut the mortgages to the current value of the homes and resell the mortgages to a private investment firm, which would allow homeowners to lower their monthly payments and hang onto their property.