The Department of Housing and Urban Development is refusing to take a position on eminent domain until a city or municipality actually condemns and seizes a mortgage and seeks to refinance the loan through a special FHA refinancing program.
In a letter to three Republican California congressmen, HUD acting assistant secretary Elliot Mincberg said HUD recognizes the “serious concerns” raised by the issue of eminent domain.
Richmond, Calif., is presently facing several private lawsuits to stop it from condemning and refinancing over 60 underwater private-label loans.
The three congressmen (Reps. Ed Royce, Gary Miller and John Campbell) are pressing HUD to block any refinancings through the FHA.
In the letter, the assistant secretary points out that HUD does not know whether any new mortgage created through eminent domain would qualify for FHA mortgage insurance.
“Moreover, until such plans produce concrete, analyzable results, HUD will not know what, if any, effects it will have on FHA and the mortgage market,” Mincberg says in the Aug. 12 letter.
Mortgage Resolution Partners is working with the city of Richmond and plans to refinance seized mortgages via the FHA short refinance program. That short refi program would require the San Francisco-based mortgage banking firm to reduce the loan amount by at least 10% to get the LTV down to 96.5%.
“HUD is continuing to monitor closely events on this issue,” Mincberg says. “If necessary, HUD will issue informational guidance to FHA-approved lending institutions as appropriate.”