Policy Resolution HSE-15-16

WHEREAS, the National Black Caucus of State Legislators (NBCSL) recognizes the historic challenges that people of color have experienced in mortgage lending;

WHEREAS, the housing crash of 2008 has led to a reduction in available mortgage credit, exacerbating the challenges of aspiring minority homeowners;

WHEREAS, some municipalities have taken it upon themselves to partner with a commercial entity and use eminent domain laws to restructure mortgage obligations;

WHEREAS, eminent domain laws are typically used to allow the state to take private property for public use and are a vital tool for community development;

WHEREAS, there is currently no precedent of the U.S. Supreme Court that allows a government to seize private property and redistribute it to others for the general purpose of improving conditions, potentially leaving municipalities engaged in these eminent domain programs vulnerable to legal action;

WHEREAS, the Federal Housing Finance Administration (FHFA) has indicated it could order Fannie Mae and Freddie Mac to cease doing business in areas “employing eminent domain to restructure mortgage loan contracts”;

WHEREAS, the Obama administration has remained largely quiet on this issue, allowing courts to determine legality;

WHEREAS, municipalities having the ability to restructure loans to avoid foreclosures could provide an economic benefit to the community as well as the homeowner;

WHEREAS, restructuring such mortgages could have a positive impact on minority communities in particular, which have suffered most from foreclosures;

WHEREAS, persons of color still find mortgage credit more difficult to come by, and have disproportionately had to rely on FHA loans to achieve the American Dream of home ownership;

WHEREAS, eminent domain programs could increase lender risk and could have negative effect on loan availability for aspiring homeowners and on housing prices in neighborhoods.

THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) encourages policymakers at all levels to recognize the potential dangers to minority communities in using eminent domain laws to seize mortgages;

BE IT FURTHER RESOLVED, that NBCSL encourages policymakers at all levels to examine and take appropriate action, if necessary, based on the court’s decision of its legality, on the use of eminent domain laws for the restructuring of mortgages because of potentially disproportionate adverse effects on aspiring homebuyers in communities with high foreclosure rates;

BE IT FURTHER RESOLVED, if this use of eminent domain is determined to be legal, NBCSL urges municipalities to work with the Federal Housing Finance Administration and lenders to ensure mortgage options in the locality remain stable and obtainable for others in the community;

BE IT FURTHER RESOLVED, that NBCSL supports and commends government and lender programs that seek to prevent foreclosures; calls for continued support of those efforts and assurance that lenders will be equipped and staffed adequately to reach out to borrowers before situations turn critical, allowing for mediation where necessary, and promoting financial literacy that will help prevent aspiring homeowners from entering situations they cannot manage; and

BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and United States Senate, the Federal Housing and Finance Administration (FHFA), and other federal and state government officials as appropriate.

• SPONSOR: Representative Johnny Shaw (TN)
• Committee of Jurisdiction: Housing Policy Committee
• Certified by Committee Chair: Representative Brenda Gilmore (TN)
• Ratified in Plenary Session: Ratification Date is December 12, 2014
• Ratification is certified by: Representative Joe Armstrong (TN), President