Using the authority of state government to actually help people has Wall Street bankers in a panic, spurring threats of aggressive legal retaliation against the town of Richmond, California simply for trying to help some of its struggling homeowners.

‘Eminent domain’ has long been a dirty term for housing justice advocates who have seen municipalities invoke public seizure laws to displace residents and communities to make way for highways, shopping malls, and other big dollar projects.

But in Richmond, city officials are using eminent domain to force big banks to stop foreclosing on people’s homes in an innovative new strategy known as ‘Principle Reduction’ aimed at addressing California’s burgeoning housing crisis.

Richmond became the first California city last week to move forward on a plan that has been floated by other California municipalities to ask big bank lenders to sell underwater mortgage loans at a discount to the city (if the owner consents), and seize those homes through eminent domain if the banks refuse. The city has committed to refinancing these homes for owners at their current value, not what is owed.

City officials launched this process by sending letters in late July to 32 banks and other mortgage owners offering to buy 624 underwater mortgages at the price the homes are worth, not what the owners owe.

“After years of waiting on the banks to offer up a more comprehensive fix or the federal government, we’re stepping into the void to make it happen ourselves,” Mayor Gayle McLaughlin said in late July.