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

Investor Update: On August 8, DSNews published an article titled FHFA Calls Eminent Domain 'Threat' to GSEs, May Consider Legal Action.

FHFA Statement on Eminent Domain - Following is the aforementioned article.

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

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.

Mortgage Resolution Partners is the firm that has been actively approaching different cities to propose the use of eminent domain as a solution to address underwater mortgages. As part of the plan, MRP would provide the funds to refinance the mortgages, then take a government-approved flat fee per mortgage, according to the firm’s website.

To view the online article, please click here.

 

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

OneCommunity

Stay informed about the latest industry news and events with our All Client Alert email newsfeed.

Ask The CEO

Got a question about Safeguard in the industry? Let us know in our Ask the CEO online Q&A section.