SIFMA Opposes Use of Eminent Domain; Will Cause Irreparable Damage to Recovering Housing Market

Release Date: September 7, 2012
Contact: Katrina Cavalli, (212) 313-1181,
Liz Pierce, (212) 313-1173,      

SIFMA Opposes Use of Eminent Domain; Will Cause Irreparable Damage to Recovering Housing Market 

New York, NY, September 7, 2012—SIFMA, along with 25 other trade associations, today expressed its opposition to the current proposals to use eminent domain to take mortgages from residential mortgage-backed securities (RMBS) held in existing investment portfolios and restructure such loans through FHA and Ginnie Mae.  SIFMA and the coalition of trade groups are actively working together to advocate against this clear abuse of the sovereign power of eminent domain, emphasizing that recently proposed plans regarding the use of eminent domain to seize mortgage loans are unconstitutional on multiple grounds and violate federal and state laws. 

The organizations expressed their united view in a response to the Federal Housing Finance Agency’s August 9, 2012 publication of a notice requesting comments on the potential use of eminent domain.  The groups share many of the concerns FHFA raised in its notice, including the impact of eminent domain plans on mortgage lending, mortgage finance markets and mortgage investors, concerns regarding valuation and the profit motivation that underlies this scheme, and the constitutionality of the proposal.  

“If these proposals go forward, there will be a severe, negative impact on mortgage markets, and therefore on mortgage borrowers,” said Randy Snook, SIFMA executive vice president, business policies and practices.  “The use of eminent domain confronts lenders and investors with an unquantifiable new risk, which will reduce the amount of credit available to potential homeowners and causing irreparable damage to the recovering national housing market.  These negative outcomes will vastly outweigh any small benefits that jurisdictions might hope to achieve using these proposals.” 

SIFMA and the other trade groups share FHFA’s serious concern over the chilling effects the use of eminent domain would have on credit extension and on investment in housing markets.  The limited focus of the proposals would selectively assist only those whose mortgages provide the best returns to the promoters. A sliver of borrowers might be helped, but all those seeking credit would be harmed as this action would most certainly result in mortgage investors seeking a significant risk premium to compensate for the risk of seizure by eminent domain.  Since all borrowers would suffer from increased costs for credit and reduced credit availability, any claim that the proposed use of eminent domain serves a public service is unsupportable.  

In the letter, the groups offer an examination of how the eminent domain proposals would allocate losses and profits.  The proposals would impose losses on mortgage investors—including the retirement and savings accounts of thousands of main street investors—in order to extract profits that would be delivered to a small group of opportunistic investors, with the added value of guarantees given by Ginnie Mae. This plan is a veiled short-term, opportunistic investment strategy that utilizes federal government insurance and guarantees to achieve its goals.  This example shows that the proposals would extract profits at the expense of existing security holders and transfer that wealth to the investors and the architects of this scheme.  On its face, this indicates that the just compensation that is required by both the U.S. Constitution and various state laws would not be provided to the victims of these seizures. 

Finally, the groups strongly agree with the concern expressed by FHFA regarding the legality of the eminent domain proposals under the U.S. Constitution, state constitutions and other federal and state laws.  The U.S. Constitution permits government seizure of private property only if such takings are made for a public purpose in exchange for just compensation; state constitutions and laws governing eminent domain are often equally or even more demanding.  The likelihood of any material public benefit arising from these proposals is very low, and the fact that the proposals would transfer profits from one private party to another makes the use of eminent domain as proposed Constitutionally defective.   

The letter is available here: For more information, please visit SIFMA’s Eminent Domain Resource Center:  

The groups that signed the letter are listed below: 

American Bankers Association 

American Council of Life Insurers 

American Escrow Association 

American Insurance Association 

American Securitization Forum 

Association of California Life and Health Insurance Companies 

Association of Financial Guaranty Insurers 

Association of Mortgage Investors 

California Alliance to Protect Private Property Rights 

California Bankers Association 

California Escrow Association 

California Mortgage Association 

California Mortgage Bankers Association 

California Land Title Association 

Community Mortgage Banking Project 

Consumer Bankers Association 

Consumer Mortgage Coalition 

Illinois Bankers Association 

Illinois Chamber of Commerce 

Illinois Mortgage Bankers Association 

Inland Valleys Association of Realtors 

Investment Company Institute 

Mortgage Bankers Association 

Residential Servicing Coalition 

Securities Industry and Financial Markets Association 

United Trustees Association 


The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA's mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit 


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In New York:
Katrina Cavalli


 Liz Pierce



In Washington:

Carol Danko

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