Several major mortgage investors in the US are opposing a plan by a few California local governments to forcibly buy distressed mortgages to keep struggling homeowners from being evicted.
Eighteen investment trade groups, including the Association of Mortgage Investors, American Bankers Association, Securities Industry and Financial Markets and Investment Company Institute, sent a letter last week warning that the plan could scare away future mortgage financing in those areas.
“We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues,” they said in the letter to the city governments of Ontario and Fontana, California as well as the county of San Bernardino, California.
In addition, the letter noted that the plan “would also be immensely destructive to US mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions”.
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