Rep. John Campbell (R-Calif.) yesterday introduced a bill titled "The Defending American Taxpayers from Abusive Government Takings Act" which would prohibit the four major government sponsored mortgage providers from buying loans in any community that considers using eminent domain to seize and restructure troubled mortgages, Mortgage News Daily reported today. Chicago, Berkeley and San Bernardino County, Calif., are considering a proposal to invoke eminent domain to take underwater mortgages from investor pool and restructure them to reflect the current market value of collateral to provide relief to homeowners. The municipality would then package the loans into pools and sell them on the secondary market. All opposing parties maintain that such seizures constitute an unconstitutional use of the eminent domain power and an unwarranted abridgement of investors' property rights. Campbell bases his legislation on a claim that if seizing of mortgage loans becomes widespread, the GSEs will sustain losses of up to 30 percent in their private-label residential mortgage-backed securities portfolio putting taxpayer dollars at risk. He further maintains that current and future retirees are also at risk because of the significant amounts of these securities held in public and private retirement funds, 401(k) programs and other investment vehicles. He further maintains that any takings would break a private contract agreed to by homeowners and their lenders.
