ACLU sues Fannie and Freddie regulator in eminent domain controversy

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The American Civil Liberties Union and the Center for Popular Democracy have filed a lawsuit to compel the Federal Housing Finance Agency to provide details about the agency’s relationship with the financial industry and its efforts to block local governments from using eminent domain to prevent foreclosures.

The FHFA, which regulates mortgage giants Fannie Mae and Freddie Mac, has gone on the record opposing the use of eminent domain to seize underwater mortgages and grant principal reductions to borrowers in order to put them above water. The agency has threatened to sue any local or state jurisdiction that takes such an action and/or to cease doing business in that jurisdiction, which would deny residents — many of them people of color — access to loans backed by Fannie or Freddie.

“For years, communities of color across the nation were targeted by banks peddling subprime toxic mortgages, greatly contributing to the current foreclosure crisis,” said Udi Ofer, executive director of the ACLU of New Jersey, in a statement.

“Now communities are responding by considering novel approaches to help save their neighborhoods. Municipalities should be able to consider all of their options.”

Local governments are considering invoking eminent domain in order to help homeowners remain in their homes, bolster neighborhoods and maintain property values for all homeowners, the ACLU said.

“The FHFA has taken an aggressive stance on this issue in a way that has harmed minority communities. The public deserves to know why,” said Linda Lye, staff attorney with the ACLU of Northern California, in a statement.

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Source: ACLU

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