SIFMA Statement On the JPA’s Proposed Use of Eminent Domain to Take Mortgage Loans (SIFMA Release)

Timothy W. Cameron (Managing Director, SIFMA Asset Managers Group) made a statement to the Homeownership Protection Program Joint Powers Authority (JPA) expressing his concerns for the proposed use of eminent domain to take mortgage loans. SIMFA, whose members include securities firms, banks and 30 of the country's largest asset managers, who have approximately $20 trillion under management.

In a plan put forward by the private group, Mortgage Resolution Partners (MRP), San Bernardino County will seize underwater, but performing loans from investors using the government's power of eminent domain. Fair market value would be paid to the investors, but this compensation could be considerably lower than the long term value of holding the performing loan. These loans would be renegotiated and sold to other investors, such as hedge funds. Cameron objects to this plan for three reasons.

• First he says, San Bernardino residents will be harmed. This is because investors will be reluctant to extend credit to residents in the future for fear of further seizure.
• Second, significant legal issues will have to be argued causing the county to become "...entangled in lengthy and expensive litigation."
• And third, Cameron says the plan delegates much of the County's authority to a private party with a profit motive that could put the county at risk. The County would "... position itself as a facilitator of a group of opportunistic investors' unjust, and likely unconstitutional, efforts to extract profits from a different group of investors."

In conclusion, Cameron ntoes, "The only party that receives unequivocal benefits is MRP. San Bernardino residents lose. MBS investors lose. San Bernardino County's reputation will be tarnished."

View release in full here(links externally to SIFMA website).