FHFA Calls Eminent Domain ‘Threat’ to GSEs, May Consider Legal Action

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Should government us Eminent Domain to help home owners? Please read the article below and let me know what you think.

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As local governments consider the use of eminent domain to seize underwater mortgages, they may have to deal with the Federal Housing Finance Agency (FHFA) before moving forward with the plan.

In a statement Thursday, FHFA stated it may “initiate legal challenges” to local or state actions that authorize the use of eminent domain to restructure mortgage contracts impacting Fannie Mae and Freddie Mac.

Another action the GSEs’ regulator might take is limit or stop business activity in jurisdictions that authorize the use of eminent domain to restructure mortgages.

According to the statement, the conclusion was based on the law and input received. In an analysis of the input, Alfred M. Pollard, FHFA general counsel, wrote “there is rational basis to conclude that the use of eminent domain by localities to restructure loans for borrowers that are ‘underwater’ on their mortgages presents a clear threat to the safe and sound operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.”

Pollard also stated the use of eminent domain “would run contrary to the goals set forth by Congress for the operation of conservatorships by FHFA.”

The statement follows reports that Freddie Mac might take legal action to stop Richmond, California, from using eminent domain to seize underwater mortgages. Recently, officials in the city approved adoption of the controversial approach, but the city was hit with a lawsuit Wednesday from an institutional investor group, according to a report from Reuters.

To read the complete article – please use the link below.

Eminent Domain

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