April 24, 2018

Congress to HUD: Eminent Domain Proposal Threatens Recovery

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Congress to HUD: Eminent Domain Proposal Threatens Recovery

Lawmakers are now stepping in to voice their concerns over a controversial idea to use eminent domain to seize distressed mortgages. 

Mortgage Resolutions Partners first introduced the idea a few months ago to allow local government officials to use their eminent domain authority to condemn residences with distressed mortgages and restructure the loans at a lower price. MRP has argued that it would provide municipalities an opportunity to help struggling home owners who are unable to make their mortgage payments. 

But the proposal sparked controversy among the mortgage bond investor community, which says that using eminent domain to rewrite home loans violates agreements between a bank and borrower. Now some lawmakers are now voicing their concern over the idea as well. 

"We are concerned that the proposed use of eminent domain would slow the return of private capital to the housing finance system, and threaten our fragile housing recovery," writes California House Republicans John Campbell, Gary G. Miller and Ed Royce in a letter to Housing and Urban Development Secretary Shaun Donovan. "We do not believe this is appropriate public policy, even if this use of eminent domain were to survive the inevitable legal challenges that would follow any decision to seize mortgages.”

Most of the movement supporting the use of eminent domain to seize mortgages has been centered in California municipalities. Earlier this week, Mortgage Resolution Partners entered into two additional contracts with municipalities in Richmond, Calif., and North Las Vegas, Nev., to create eminent domain programs.

Source: “Congressmen send HUD eminent domain objection letter,” HousingWire (June 12, 2013)

Read more

Cities Weigh Eminent Domain for Underwater Mortgages
Can Eminent Domain be Used to Take Over Mortgages?