Spending Bill Bans FHA from Financing Eminent Domain Loans
“The so-called cromnibus appropriations bill passed by the House late Thursday included a little-noticed provision that would make it more difficult for municipalities to use eminent domain to condemn and seize underwater mortgages.
The massive $1.05 trillion spending bill would ban the Federal Housing Administration from refinancing loans that have been seized via eminent domain. The bill is expected to be passed by the Senate soon.
Proponents of eminent domain such as San Francisco-based Mortgage Resolution Partners were planning to use FHA-insured loans to refinance loans that have been seized by municipalities and written down to their current appraised value.
But so far, the use of eminent domain has been thwarted by industry groups like the Mortgage Bankers Association and Securities Industry Financial Markets Association, which have strongly opposed Mortgage Resolution Partners’ efforts in cities like Richmond, Calif., Las Vegas and Newark, N.J.
Fannie Mae and Freddie Mac are not allowed to finance loans involved in an eminent domain takeover.”
Collins, Brian. National Mortgage News 12 December 2014.