Rep. Waters Hosts Panel on Eminent Domain Proposals to Seize Underwater Mortgages

Washington, DC – September 13, 2012 – (RealEstateRama) — Yesterday, Congresswoman Maxine Waters held a bipartisan panel discussion on the nation’s ongoing housing crisis and whether the use of eminent domain to seize underwater mortgages is a feasible alternative to provide struggling homeowners with relief. The event was the third in a series of panels Rep. Waters launched this summer to discuss current topics in financial regulation. To open the panel discussion, Rep. Waters delivered the following remarks:

“Good Afternoon.  As the Ranking Member on the Capital Markets and Government Sponsored Enterprises Financial Services Subcommittee, I am very pleased to welcome all of you to the third in a series of nonpartisan panel briefings I’ve organized to discuss emerging issues in financial regulation.  While previous panels have focused on certain aspects of the Dodd-Frank Act, I wanted to focus today’s discussion on the ongoing housing crisis and whether the use of eminent domain to seize underwater mortgages is a feasible alternative to assist struggling homeowners.

“In the previous Congress, I served as Chairwoman on the Financial Services Subcommittee on Housing and Community Opportunity.  And it was through that Subcommittee that I convened countless hearings and roundtable discussions all in efforts to understand the scope of the housing crisis and its economic impact on communities across the country.

“I’ve worked on legislation in Congress and advised the Obama Administration in developing targeted strategies to assist homeowners.  Legislatively, I was able to pass an expansion of the Neighborhood Stabilization Program (NSP) – a grant program for states and local governments to buy and revitalize abandoned and foreclosed properties.  And the Administration also included within its mortgage settlement recommendations I’ve long advocated for to improve servicing standards. However, despite these efforts and the Administration’s housing programs, foreclosures persist and we must continue our work to refine inadequate programs and build on the success of those strategies that have shown some level of success.

“Given that opportunities for a national, broad-based principal reduction program appear to be stalled, and Acting Director of the Federal Housing Finance Agency (FHFA) Edward Demarco has made clear his universal rejection of principal reduction as a federal strategy to recover the housing market, local jurisdictions such as San Bernardino, California and Chicago, Illinois are exploring alternatives that would allow them to seize and restructure underwater mortgages for the purpose of keeping families in their homes.

“While many observers see this development as the clear result of inadequate federal action, opponents of the plan cite legal and constitutional concerns with the proposals.  Industry opponents have further indicated that if jurisdictions do adopt similar plans, that the impact on housing finance and lending would be harmful to consumers.

“As the lead co-author with Rep. Sensenbrenner on H.R. 1433, “the Private Property Rights Protection Act” that passed the House with bipartisan support earlier this year, I stood firm in my opposition to the Supreme Court’s Kelo decision which I believed lowered the standard for ‘public use’ government takings.

“In June 2005, the Supreme Court issued a 5-4 decision in Kelo v. City of New London in which it held that “economic development” can be a “public use” under the Fifth Amendment’s Takings Clause, justifying the government’s taking of private property.  Following the decision, many charged that Kelo gave governments a blank check to redistribute land from the poor and middle class to the wealthy.

“In my experience, few policies have done more to dismantle communities than eminent domain.  However, where I have typically opposed eminent domain for its impact on lawful homeowners, I am intrigued by the proposals today because their main objective is to reduce principal so that people can stay in their homes.  However, these proposals do raise a lot of questions and concerns that I anticipate our panel will address today.

“While I have not endorsed eminent domain’s use for principal reduction, I believe today’s forum will afford us all an opportunity to understand how such a proposal could work, the legal questions surrounding this issue, and who would be impacted.  Today’s discussion is especially relevant since just last week FHFA concluded its comment period for input concerning the use of eminent domain for underwater mortgage refinancing.  And considering the wide range of debate and opinions on the proposal, I know our panel of experts will have a lot to discuss.

“Prior to today’s discussion, I did attend San Bernardino’s public meeting on their eminent domain’s proposal, and I do hope that our audience today will be just as engaged and ask our panel of experts substantive questions.

“Once again, my main objective in organizing this panel series was to create a forum where experts and industry insiders with opposing viewpoints could discuss financial services in an interactive setting that may not always be achieved in Congressional hearings.  Today’s panel discussion is not intended to advance one particular point of view, but is intended to provide Members and staff with educational enrichment opportunities on an ongoing basis.

“I look forward to today’s discussion, and I do thank each of you for your participation and attendance.”

The Honorable Maxine Waters (CA-35) presents FINANCIAL SERVICES PANEL SERIES
Topic: The Housing Crisis and Policy Solutions: Should Eminent Domain Be Used to Save Underwater Homeowners?

When: Tuesday – September 11, 2012
Time:  4:00 p.m.
Where: Rayburn 2226

Moderator:  Erik Schatzker – Anchor and Editor-at-Large, Bloomberg Television

Panelists:

• Tom Deutsch – Executive Director, American Securitization Forum, Inc.
• Laurie Goodman –  Senior Managing Director, Amherst Securities
• Julia Gordon – Director of Housing Finance and Policy, Center for American Progress
• Robert Hockett – Professor, Cornell Law School
• Tim Cameron – Managing Director, Securities Industry and Financial Markets Association
• Richard A. Dorfman – Managing Director, Securities Industry and Financial Markets Association
• Nela Richardson — Senior Economic Analyst, Bloomberg Government

Contact:
Mikael Moore
mikael.moore (at) mail.house (dot) gov