Rep. Campbell’s Opening Statement at Today’s Financial Services Hearing on Building a Sustainable Housing Finance System

“However, perhaps worst of all is that using eminent domain to seize mortgages is not only legally questionable, but also represents a complete abrogation of private property rights. The lenders and investors that a sustainable housing finance system relies on would not have any faith in the durability of contracts.”

WASHINGTON, D.C. – April 24, 2013 – (RealEstateRama) — Today, at a House Financial Services Committee hearing entitled “Building a Sustainable Housing Finance System: Examining Regulatory Impediments to Private Investment Capital”, Congressman John Campbell (R-CA) delivered the following opening statement highlighting the potential danger of eminent domain powers being used to bailout bankrupt cities:

“Good morning and thank you, Mr. Chairman, for convening this hearing today. As this Committee considers regulatory impediments to private capital, I want to take the opportunity to raise a related concern regarding proposals currently gaining traction that, if implemented, would do nothing less than outright deter private capital from reentering our housing finance system. This concern is the potential, expansive use of eminent domain powers to bail out bankrupt cities and communities.”

“Under proposals being considered by municipalities across the country, a local government would seize mortgage loans using the power of eminent domain and unilaterally restructure the loans terms to be more favorable to the borrower. While this sounds like an easy solution which helps homeowners, its unintended consequences would be devastating. Even the Mayor of Chicago, Rahm Emanuel, said, ‘The idea of using eminent domain is not one that I support…because I don’t think it’s the right way to address the problem.’ ”

“Primarily, the savers and retirees who own these mortgages, many of them through their pension funds and 401(k) accounts, would sustain significant losses. Additionally, the federal government would be at risk. Fannie Mae and Freddie Mac hold many of these mortgage loans in their portfolios and losses on these assets would eventually flow through to taxpayers. Even worse, these proposals often call for the FHA to refinance the restructured mortgages, shifting additional risk to taxpayers.”

“However, perhaps worst of all is that using eminent domain to seize mortgages is not only legally questionable, but also represents a complete abrogation of private property rights. The lenders and investors that a sustainable housing finance system relies on would not have any faith in the durability of contracts. Congress, the Federal Housing Finance Agency, and the Federal Housing Administration should do everything within their power to stop this proposal dead in its tracts. My bill, the Defending American Taxpayers Against Abusive Government Takings Act, would do exactly that.”

“I hope my colleagues on both sides of the aisle will join me in protecting the nation’s taxpayers, the confidence of investors, and the rule of law with respect to America’s housing finance system.”