HUD Explains Wait And See Approach To Eminent Domain Plans

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On August 12, HUD responded to a congressional inquiry about plans announced by certain localities to seize mortgages via eminent domain and potentially refinance them through the FHA. HUD states that while it is concerned about the potential eminent domain actions threatened by some localities, including most recently and aggressively by Richmond, California, HUD also recognizes the “inherent and often indispensable tool” that eminent domain can be for local government to implement public policy. HUD suggests that disputes over this novel proposed use of eminent domain may be a question for the courts and states that, pending further legal and other developments, it does not know whether any new mortgage created out of a seizure would qualify for FHA insurance and cannot currently assess the impact of the seizure of mortgages on the FHA and the broader mortgage market.