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July 30, 2013
NAFCU backs bill to halt eminent domain use
July 31, 2013 – NAFCU and a dozen other financial industry trades asked the House of Representatives Tuesday to back an amendment to a 2014 appropriations measure that would bar the Federal Housing Administration from insuring residential mortgages seized through eminent domain.
Eminent domain is a local authority that some are seeking to use in order to refinance mortgages that are current but underwater into new loans based on fair market value. Lenders in this case are left to write off the lost equity.
Rep. Mick Mulvaney, R-S.C., plans to offer an amendment to H.R. 2610, the fiscal 2014 appropriations package that covers operations of the Department of Housing and Urban Development. The trades urged support for the measure to help "ensure that taxpayers don't foot the bill for this arguably unconstitutional scheme."
An investment firm called Mortgage Resolution Partners has entered into agreements with municipalities in California to use their eminent domain power to acquire performing but underwater mortgages and have them refinanced through FHA. This would affect both lenders and investors in private-label securities backed by the loans.
Republican Reps. Ed Royce, Gary Miller and John Campbell, all from California, have asked HUD to confirm in writing its policy on this practice. Campbell has offered a bill, H.R. 2733, to bar FHA and Agriculture Department from backing or making loans in areas where eminent domain is being used to seize mortgage loans. H.R. 2767, the "Protecting American Taxpayers and Homeowners Act," also includes measures aimed at preventing the use of federal guarantees in the refinancing of mortgage seized by eminent domain.
NAFCU has been closely monitoring this developing issue since last year. In September, it wrote the Federal Housing Finance Agency to support the FHFA in any "appropriate action" it might take to halt this use of eminent domain. The use of such authority "is dangerous and could . . . impede the recovery of the housing market," wrote NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt.
Eminent domain is a local authority that some are seeking to use in order to refinance mortgages that are current but underwater into new loans based on fair market value. Lenders in this case are left to write off the lost equity.
Rep. Mick Mulvaney, R-S.C., plans to offer an amendment to H.R. 2610, the fiscal 2014 appropriations package that covers operations of the Department of Housing and Urban Development. The trades urged support for the measure to help "ensure that taxpayers don't foot the bill for this arguably unconstitutional scheme."
An investment firm called Mortgage Resolution Partners has entered into agreements with municipalities in California to use their eminent domain power to acquire performing but underwater mortgages and have them refinanced through FHA. This would affect both lenders and investors in private-label securities backed by the loans.
Republican Reps. Ed Royce, Gary Miller and John Campbell, all from California, have asked HUD to confirm in writing its policy on this practice. Campbell has offered a bill, H.R. 2733, to bar FHA and Agriculture Department from backing or making loans in areas where eminent domain is being used to seize mortgage loans. H.R. 2767, the "Protecting American Taxpayers and Homeowners Act," also includes measures aimed at preventing the use of federal guarantees in the refinancing of mortgage seized by eminent domain.
NAFCU has been closely monitoring this developing issue since last year. In September, it wrote the Federal Housing Finance Agency to support the FHFA in any "appropriate action" it might take to halt this use of eminent domain. The use of such authority "is dangerous and could . . . impede the recovery of the housing market," wrote NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt.
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