Mortgages Seized by Cities Won't Be Backed by FHA or Other Federal Guarantees
Per the CAR Broker newsletter--
A controversial plan to use a municipality's eminent domain powers to seize properties in default has suffered a severe setback. FHA, Ginnie Mae, and HUD now have no funds to insure, securitize or establish a federal guarantee of any mortgage or mortgage backed security that refinances or replaces a mortgage that was subject to eminent domain condemnation or seizure by a state, municipality or other political subdivision of the state. The funding to allow such federal guarantees was removed in the Fiscal Year 2015 Omnibus Appropriations bill. This should make it much more difficult to finance or resell any such securities under these programs. Such mortgage seizure programs were proposed by some companies that promised municipalities a portion of the proceeds when the mortgages were resold. Under the program, the defaulting or underwater homeowners would also be allowed to stay in their homes with the mortgage amount reduced. The City of Richmond had approved a study of the mortgage seizure plans which was being monitored by other cities in California.
Remember--these government entities are (pretty much) the only game out there insuring and securitizing mortgages in the secondary market. The private industry hasn't stepped up to the plate to take over yet.
A controversial plan to use a municipality's eminent domain powers to seize properties in default has suffered a severe setback. FHA, Ginnie Mae, and HUD now have no funds to insure, securitize or establish a federal guarantee of any mortgage or mortgage backed security that refinances or replaces a mortgage that was subject to eminent domain condemnation or seizure by a state, municipality or other political subdivision of the state. The funding to allow such federal guarantees was removed in the Fiscal Year 2015 Omnibus Appropriations bill. This should make it much more difficult to finance or resell any such securities under these programs. Such mortgage seizure programs were proposed by some companies that promised municipalities a portion of the proceeds when the mortgages were resold. Under the program, the defaulting or underwater homeowners would also be allowed to stay in their homes with the mortgage amount reduced. The City of Richmond had approved a study of the mortgage seizure plans which was being monitored by other cities in California.
Remember--these government entities are (pretty much) the only game out there insuring and securitizing mortgages in the secondary market. The private industry hasn't stepped up to the plate to take over yet.
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