The use of eminent domain by some local governments to force underwater mortgages from private-label mortgage backed securities to be restructured at a discount could harm mortgage markets, impose losses upon MBS investors and may not be legal, according to a letter from several mortgage associations.

NAFCU also submitted a separate letter on the topic. The Federal Housing Finance Agency, which runs Fannie Mae and Freddie Mac, issued a request for comment Aug. 9 in which it expressed “significant concerns” about the practice.


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