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FHFA Raises Concerns Over Eminent Domain Proposal

August 10, 2012

On Aug. 8, FHFA, the conservator of Fannie Mae and Freddie Mac (the GSEs), sent a notice to the Federal Register announcing the acceptance of public comments on the restructure of performing loans through the use of eminent domain. 

Under a proposal in San Bernardino County, Calif., the local government would purchase performing mortgages that are underwater out of private label securities at a discounted value from the investors, in order to modify the loan terms. FHFA expressed concerns about the use of eminent domain for this purpose and indicated that the GSEs and the Federal Home Loan Banks were likely to experience losses.

NAR is analyzing the potential effects on credit access and will provide comments to FHFA. Comments are due no later than Sept. 7, 2012.