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Bill Striking at Eminent Domain Reintroduced

by devteam July 23rd, 2013 | Share

RepresentativernJohn Campbell (R-CA) has reintroduced the Defending AmericanrnTaxpayers From Abusive Government Takings Act he originallyrnsponsored in September of 2012. The law is a reaction to the plansrnof several municipalities early last year to use their power ofrneminent domain to seize underwater mortgages. </p

Stockton,rnCalifornia; Chicago, Brockton, Massachusetts; and several otherrnmunicipalities suggested the plan under which they would purchasernloans on homes in their communities from securitized mortgage pools,rncompensating the investors at the market value of the collateralrnproperties. The loans would then be restructured to put homeownersrnback into an equity position and resold on the secondary market. </p

Campbell’srnbill would amend the Federal National Mortgage Association Act andrnthe Federal Home Loan Mortgage Corporation Act to prohibit Fannie Maernand Freddie Mac from purchasing any mortgage secured by a propertyrnwithin a county that had exercised eminent domain for such a purposernwithin the preceding 120 months. It would also amend the NationalrnHousing Act to prohibit the Secretary of the Department of Housingrnand Urban Development (HUD) from insuring or guaranteeing any housingrnor small business loan in such counties. The legislation wouldrneffectively dry up housing related credit anywhere eminent domainrnpower was exercised as a loan modification tool. </p

Therncities which had proposed using eminent domain all pulled back fromrnthe idea in the face of a storm of objections from Wall Street andrnthe Federal Housing Finance Agency, but it was recently given newrnlife with an article published by the Federal Reserve Bank of NewrnYork. The paper, by Robert Hockett, a Cornell Law School professor,rnadvocates the use of eminent domain as a tool which could be used byrnstate, local, and federal government to assist distressed homeowners.rn</p

ThernMortgage Bankers Association (MBA) quickly released a statementrncommending Campbell for reintroducing the bill and offering thernAssociation’s support. David H. Stevens, MBA’s President and CEO,rncalled the proposed use of eminent domain “clearlyrnunconstitutional” and said, “Using eminentrndomain to seize mortgages will result in tighter, more expensiverncredit for potential home buyers and those looking to refinance,rndriving down home values and threatening local economic recovery. rnFurther, cramming losses down on existing mortgage backed securitiesrnholders will drive down the value of millions of Americans’rninvestments, including pension plans, mutual funds and 401(k)rnretirement accounts.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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