FHFA to Cities:The Federal Housing Finance Agency is the latest agency to step in and threaten lawsuits to try to stop municipalities from using eminent domain to purchase underwater mortgages. The agency says they have “serious concerns” about any municipality that adopts such a plan, and they will consider legal action against any city that does.
The agency’s announcement follows shortly after a group of the nation’s largest bondholders filed a lawsuit against the city of Richmond, Calif., which is trying to move forward with using eminent domain to seize mortgages. Fannie Mae and Freddie Mac, which are regulated by FHFA, are among the bondholders involved in the lawsuit. The lawsuit calls the use of eminent domain to seize mortgages “unconstitutional” and argues that the loans aren’t being seized for a valid public purpose.
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