Opposing the Use of Eminent Domain in Pomona, CA

SIFMA and 21 associations provide comments to the Mayor and City Council of Pomona, California strongly opposing any proposal that would use the City’s eminent domain power to acquire certain underwater mortgage loans held by private-label mortgage-backed securities.  The group believes that these proposals raise very serious legal and constitutional issues. No jurisdiction has ever used eminent domain to acquire underwater mortgages in securitized pools. Such a novel use of the eminent domain powers is unprecedented and would, in our view, not survive the multiple legal challenges that would ensue. In addition to the legal issues, the group warns the use of eminent domain will also be immensely destructive to U.S. mortgage markets in general and to specific communities using eminent domain, in particular. If the sanctity of the contractual relationship between a borrower and a creditor is undermined by eminent domain, both lenders and investors will be reluctant to provide future funding.