WASHINGTON – July 24, 2013 – Two powerful trade groups on Monday, July 22 said they support action by U.S. Rep. John Campbell, R-Orange County, to reintroduce a bill that would limit the ability of municipalities to use eminent domain to seize underwater mortgages.
The legislation, reintroduced by Campbell last late week, drew the backing of Mortgage Bankers Association and the Securities Industry and Financial Markets Association.
The proposed Defending American Taxpayers from Abusive Government Takings Act is aimed at stopping city and county governments from enacting profit-making schemes that seek to cash in on the plight of underwater homeowners through the arbitrary seizure of private home loans, Campbell said. It would also prevent Fannie Mae and Freddie Mac from buying any home loans seized by eminent domain.
San Bernardino County and two of its cities in January abandoned a plan by Mortgage Resolution Partners to use eminent domain to seize troubled mortgages and write down debt for homeowners.
The decision struck a blow to a concept that, while controversial, drew national attention as a potential solution to the mortgage crisis. Now, local and regional governments elsewhere are considering similar proposals.
Those locales include Richmond in the Bay Area, where home prices have dropped below 58 percent since the housing peak, and North Las Vegas, where up to 5,000 residential mortgage loans face forced seizure by their local government.
Campbell is persisting with plans to get legislation in place to stop the eminent domain action, as well.
He said he is pressing for the bill on grounds the proponents of the eminent domain schemes intend to use tax dollars to seize distressed home loans to fund “unconventional” loan modifications and partner with the governments to make a profit in some of the most vulnerable areas of the country.
Even more egregiously, the underwriter for the unpaid principal balance in this scheme will not be private financiers, but the American taxpayer, Campbell said in a statement. “Using eminent domain to seize mortgages is not only legally questionable it represents a complete abrogation of private property rights.”
David Stevens, president and chief executive of Mortgage Bankers Association, commended Campbell for reintroducing the legislation.
“Using eminent domain to seize mortgages will result in tighter, more expensive credit for potential home buyers and those looking to refinance, driving down home values and threatening local economic recovery,” Stevens said in an interview.
“We have a high level of concern for communities that have been most impacted as a result of home price declines,” he added. “It remains a top priority for everyone working on housing issues inside Washington. But the reality is nothing can be more harmful to those communities than an eminent domain law.”