The Homeownership Protection Program Joint Powers Authority in San Bernardino County, Calif., formally rejected a proposal Jan. 24 to use eminent domain to seize underwater mortgages, HousingWire reported. The idea was first floated in June 2012.

The JPA, which started to investigate alternate possibilities once homeowners and other interested parties voiced dissatisfaction with the eminent domain proposal, issued a Request for Qualifications in search of additional plans to tackle the mortgage crisis.

“It’s wrong to impose that risk on the community without support from the community, and that level of support has not materialized,” said Gregory Devereaux, chief executive officer of San Bernardino County, HousingWire reported. “We don’t want to do more harm than good in what we choose to do.”

The original plan, led by venture capitalist Mortgage Resolution Partners LLC, called for local governments to mandate sales of securitized mortgages so that they could be restructured to reflect the homes’ current market values, which could help homeowners lower their monthly payments and possibly regain equity in the properties, according to Bloomberg, which also reported on the proposal’s rejection.

However, investors such as Pacific Investment Management Co., which operates the world’s largest bond fund, and at least 18 other entities representing bankers, homebuilders and other financial services firms have opposed the eminent domain proposal.

There were further concerns that the proposal would prevent JPA from generating more viable and perhaps more “diplomatic” options, HousingWire reported. The mere consideration of eminent domain interfered with San Bernardino’s efforts to partner with banking, mortgage, real estate and investment entities in offering various types of assistance to local homeowners, Devereaux noted, HousingWire reported.

Tom Deutsch, executive director at American Securitization Forum, expressed approval of JPA’s decision to reject the use of eminent domain to seize mortgages.

“We hope that today’s expressed views after San Bernardino County’s due diligence on the issue is a strong signal to other jurisdictions that the question of whether eminent domain to seize mortgage loans is a prudent public and legal policy has been asked and answered,” Deutsch told HousingWire. “The use of eminent domain would ultimately be counterproductive to the housing market and the return of private capital to the mortgage finance system.”

Bloomberg reported that the use of eminent domain to aid homeowners also has been considered by officials in Illinois, New York and Massachusetts. Residents in those states were skeptical of the concept and of the investor group, Mortgage Resolution Partners, advocating it. Officials in those states have yet to make their decisions.