San Francisco Controller's Report Discourages Eminent Domain Use

On February 5, Bloomberg published an article discussing San Francisco Controller Ben Rosenfield's recent report warning of potential negative impacts from the city's participation in an eminent domain program designed to help homeowners avoid foreclosure.

San Francisco Controller's Report Discourages Eminent Domain Use

(Bloomberg)--San Francisco's controller discouraged lawmakers from going forward with a proposal to use the city's eminent-domain powers to help homeowners avoid foreclosure, citing federal limitations and risks to the city's borrowing costs.

"The city's participation in an eminent-domain program will likely have broader negative impacts on the city's participation in financial markets, at least for an initial period," San Francisco's Controller Ben Rosenfield wrote in a report released Thursday.

The study is a response to a proposal from San Francisco Supervisor John Avalos to use eminent domain to take over loans on property with a market value below the mortgage amount. Avalos has said he wants to help working-class and middle-class workers stay in the city of about 837,000.

The San Francisco Board of Supervisors asked the controller in October to look into the idea of partnering with Richmond, a nearby refinery town of about 108,000 that voted in 2013 to adopt a plan to use eminent domain to seize loans and modify them to help homeowners.

The report cited a federal law that bars some government agencies from involvement in any mortgage seized through eminent domain. While it doesn't place any restrictions on U.S.-backed mortgage giants Fannie Mae and Freddie Mac, a memo from the general counsel at the Federal Housing Finance Agency said the practice threatens their safe and sound operations, the report said.

'Inviable Option'

"Precluding any participation from Fannie Mae and Freddie Mac, the use of eminent domain would seem to be an inviable option," according to the study.

The controller recommended developing a mortgage-assistance program for borrowers with troubled mortgages that would reduce the principal loan amount. He also suggested creating an emergency-assistance program for homeowners facing an unexpected hardship who have defaulted or are at risk of default.

“The eminent-domain proposal is not one we’re recommending,” Rosenfield said in a telephone interview. “It comes with risks. It hasn’t yet been proven in any jurisdiction in the U.S.”

Avalos said he’s discouraged that the controller didn’t offer a plan to help borrowers whose loans have been securitized.

“I’m disappointed that they seem to have bought into Wall Street’s scare tactics about eminent domain,” Avalos said in a statement. He said he plans to call a hearing soon to review the report.

“Using eminent domain could put the entire city’s residents at risk by making lenders less willing to lend money to future homebuyers,” David Stevens, president of the Mortgage Bankers Association, said in an e-mailed statement.

Please click here to view the article online.

About Safeguard 
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow.  Website:


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