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Tuesday, May 27, 2014

House Committee Restricts Funds from Eminent Domain Abuse

The House Appropriations Committee passed a transportation and housing bill that would prevent the Federal Housing Administration from insuring mortgages or mortgage-backed securities that replace mortgages seized through eminent domain. The bill came in response to interest last year by several western municipalities in using their eminent domain powers to restructure underwater mortgages.

Last fall, ABA and several trade groups expressed their support for this provision, explaining that it would stop a “new risk to the housing finance system [that] would freeze the return of private capital to our markets at a time when many in Congress are looking for ways to increase the role of the private sector and decrease the federal government’s footprint.” They added:

Using the power of eminent domain to abrogate a contractual agreement between borrower and creditor would have far greater and lasting negative effects on existing and future homeowners and Main Street investors.

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