Rep. John Campbell (R-CA) has reintroduced The Defending American Taxpayers from Abusive Government Takings Act, legislation to stop reckless city and county governments from enacting profiteering schemes that seek to cash in on the plight of underwater homeowners through the arbitrary seizure of private home loans. In an expansive, flawed and untenable interpretation of eminent domain authority, several local governments around the country have proposed plans to override property rights in a device that is specifically designed to make money for over-leveraged cities. The Act prohibits Fannie Mae and Freddie Mac from purchasing, the FHA from insuring, and the Department of Veterans Affairs from guaranteeing, making, or insuring, a mortgage that is secured by a residence or residential structure located in a county in which the State has used the power of eminent domain to take a residential mortgage.
“Using eminent domain to seize mortgages is not only legally questionable,” said Rep. Campbell, “it represents a complete abrogation of private property rights. The federal government and the American taxpayer would be forced to bear all the risk in the event of a failure. Further, these schemes pose a critical threat to recovery of the housing sector as lenders and investors that a sustainable housing finance system rely on would not have any faith in the durability of contracts. Moreover, the savers and retirees who own these mortgages, many of them through their pension funds and 401(k) accounts, would be exposed to serious losses. “
The authors of these schemes intend to use federal taxpayer dollars to seize distressed home loans in order to fund unconventional loan modifications. Not only will cities and counties benefit from this wealth redistribution plot, private consulting firms purporting to be experts on eminent domain seek to partner with these governments in order to profit from this abuse of power. Even more egregiously, the underwriter for the unpaid principal balance in this scheme will not be private financiers, as proponents for the eminent domain plan claim, but the American taxpayer.
Despite the failure of Mortgage Resolution Partners to receive approval for their eminent domain plot by San Bernardino County, Calif. last year, local governments and cities around the country persist in entertaining similar proposals. The Defending American Taxpayers from Abusive Government Takings Act will preserve and uphold the rule of law, protect the taxpayer from abusive crony capitalism, defend against misguided wealth redistribution conspiracies, and facilitate the recovery of the American housing market.
“Congressman Campbell is to be commended for reintroducing legislation that would limit the ability of local municipalities from using eminent domain to seize residential mortgages, and prohibit Fannie Mae and Freddie Mac from purchasing any loans seized in this clearly unconstitutional manner," said MBA President and Chief Executive Officer David H. Stevens.
The Defending American Taxpayers from Abusive Government Takings Act currently awaits consideration in the House Committee on Financial Services.