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Federal Dollars Can’t be Used in Eminent Domain Efforts in Some Markets

Michael Belote, Esq.

Good policy on page 1,560

We have received the following good news from SIFMA (Securities Industry and Financial Markets Association) with whom UTA joined along with an industry-wide coalition, against loan-related eminent domain efforts in 2012.

The President has signed into law the Fiscal Year 2015 Omnibus Appropriations bill.  The law totals $1.014 trillion in discretionary spending and funds the government through September 30, 2015.

Contained in this legislation is a provision which would effectively prohibit HUD, FHA, or Ginnie Mae’s involvement in the eminent domain scheme developed by Mortgage Resolution Partners and considered by more than a dozen municipalities across the country including Richmond (CA), San Bernardino (CA), North Las Vegas (NV), and Newark (NJ).  This scheme is primarily reliant upon the refinancing of seized loans through FHA’s short refinance program and resecuritization through Ginnie Mae.

Specifically, the legislation, signed into law, states:   “None of the funds made available in this Act shall be used by the Federal Housing Administration, the Government National Mortgage Administration, or the Department of Housing and Urban Development to insure, securitize, or establish a Federal guarantee of any mortgage or mortgage backed security that refinances or otherwise replaces a mortgage that has been subject to eminent domain condemnation or seizure, by a state, municipality, or any other political subdivision of a state.”

Upon passage of this law, SIFMA president and CEO Ken Bentsen made the following statement:
“SIFMA applauds Congress and the Administration for wisely stepping into the eminent domain debate and preventing the misuse of an important federal backstop by private parties to facilitate an unconstitutional taking of personal property for private gain.  Today’s action should go a long way in improving investor confidence in the housing finance system and installs one more obstacle to this reckless proposal.  SIFMA and its members welcome this development and encourage communities considering this form of eminent domain to reconsider and work to find alternatives that help homeowners and protect taxpayers and investors.”

Read a copy of the coalition letter

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