Eminent Domain Bill Seeks to Protect Taxpayers, Retirees

""Representative John Campbell"":http://www.campbell.house.gov/index.php?option=com_content&view=frontpage&Itemid=1 (R-California) reintroduced a bill last week to limit potential harm to taxpayers and retirees if city and county governments were to use the power of eminent domain to take over underwater mortgages.

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Known as the _The Defending American Taxpayers from Abusive Government Takings Act_, the bill targets a controversial proposal to have local governments seize underwater mortgages through eminent domain, and then have the mortgages refinanced under new terms reflecting the current value of the home. Last year, Mortgage Resolution Partners (MRP) ""proposed"":http://dsnews.comarticles/san-bernardino-county-considering-use-of-eminent-domain-to-rescue-underwater-homeowners-2012-06-29 the idea to officials of San Bernardino County--who ""rejected"":http://dsnews.comarticles/san-bernardino-county-rejects-eminent-domain-proposal-2013-01-28 the proposal--and has since taken the concept to various cities.

According to Campbell, not only is the proposal ""legally questionable,"" but it also ""represents a complete abrogation of private property rights.""

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Campbell also raised concerns, such as whether or not the GSEs would be guaranteeing or purchasing the refinanced loans or if the mortgages will be held in portfolios or securitized.

""[T]he savers and retirees who own these mortgages, many of them through their pension funds and 401(k) accounts, would be exposed to serious losses,"" he warned.

To protect taxpayers, the bill proposes to prevent the GSEs from purchasing mortgage loans originating in counties that applied eminent domain to seize underwater mortgages within the past 10 years. The bill would also prevent the Federal Housing Administration from guaranteeing mortgages in those counties and would prohibit the United States Department of Agriculture from making, insuring, or guaranteeing mortgages in those counties as well.

The act was first introduced in September 2012 but did not make it past the committee stage. Now, the bill is awaiting consideration in the House Committee on Financial Services, according to a release.

David H. Stevens, president and CEO of the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA), declared his support for the act.

""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. Further, cramming losses down on existing mortgage backed securities holders will drive down the value of millions of Americans' investments, including pension plans, mutual funds and 401(k) retirement accounts,"" Stevens said.