City nixes eminent-domain idea for rescuing homeowners after Fannie Mae and Freddie Mac object
Initially interested in a cutting-edge proposal to use eminent domain as a way of rescuing underwater homeowners facing mortgage foreclosure, the governing body of a Las Vegas suburb unanimously rejected the idea because of opposition from a couple of big players in the mortgage industry.
Fannie Mae and Freddie Mac told the North Las Vegas city council they would would probably “limit, restrict or cease business activities” in communities where the proposal—which involves the city buying mortgages at a discount, with the help of a venture capital firm, and then offering them to homeowners for a lower monthly payment—is implemented, the Las Vegas Review-Journal reports.
The two entities, which are backed by federal government funding, own or securitize most of the mortgages in the U.S. in an effort to make housing affordable. Hence, an inability to obtain mortgages guaranteed by Fannie Mae or Freddie Mac could adversely affect virtually all home sellers in the area, as well as those seeking to purchase homes.
See also:
ABAJournal.com: “Controversial eminent domain approach to restructuring underwater mortgages gathers steam”
New York Times (reg. req.): “Life Without Fannie Mae and Freddie Mac”
