The controversy surrounding the proposed use of eminent domain laws to seize underwater mortgages in California has taken a new turn, as David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA), railed against the ‘radical’ use of eminent domain in a newspaper op-ed column.
In a column published in the San Bernardino Sun, Stevens warned that using eminent domain to seize, refinance and resell underwater mortgages would have a deleterious effect on both the California and national economy.
‘Such government action will be viewed by investors as arbitrary and capricious,’ Stevens wrote. ‘Once the government begins condemning and seizing mortgages, investors, who we depend on to buy mortgages, will likely believe that any mortgage can be interfered with and therefore the risk of loss to them will be too great to allow any loans to come from this affected market area. In short, fear of government action will likely prevent homes from being purchased and halt any chance of economic recovery.’
Stevens pointed to the problems facing the Phoenix housing market and its use of ‘efficiently moving through the foreclosure backlog using a nonjudicial process’ as a possible alternative to the eminent domain plan.
‘We need to do all we can to protect families wishing to stay in their homes during periods of economic uncertainty without harming the future of the same community to recover for the long term,’ Stevens continued. ‘The fact is, there is no silver bullet to recovery in the real estate finance markets. Policymakers must consider any consequences to quick fixes in the real estate market financial system. Eliminating uncertainty, reducing foreclosure backlogs, creating an environment for private capital to re-enter the market, and allowing access to credit for qualified homeowners is what will lead us into financial stability and economic growth.’
Editor's note: MortgageOrb focuses on the eminent domain controversy in this week's E-Feature.