The Federal Housing Finance Agency (FHFA) oversees the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks (Banks). Fannie Mae and Freddie Mac (the Enterprises) are operating in conservatorships with a core mission of supporting the housing market. FHFA’s obligations, as conservator, are to preserve and conserve assets of the Enterprises and to minimize costs to taxpayers. The Enterprises purchase a
large portion of the mortgages originated in the United States and they hold private label mortgage backed securities containing pools of non-Enterprise loans. The Banks likewise have important holdings of such securities. In addition, the Banks accept collateral that consists of mortgages of member financial firms pledged in exchange for
advances of funds.

FHFA CONCERNS

FHFA has significant concerns about the use of eminent domain to revise existing
financial contracts and the alteration of the value of Enterprise or Bank securities
holdings. In the case of the Enterprises, resulting losses from such a program would
represent a cost ultimately borne by taxpayers. At the same time, FHFA has significant
concerns with programs that could undermine and have a chilling effect on the extension
of credit to borrowers seeking to become homeowners and on investors that support the
housing market.

FHFA has determined that action may be necessary on its part as conservator for
the Enterprises and as regulator for the Banks to avoid a risk to safe and sound operations
and to avoid taxpayer expense.

Among questions raised regarding the proposed use of eminent domain are the
constitutionality of such use; the application of federal and state consumer protection
laws; the effects on holders of existing securities; the impact on millions of negotiated
and performing mortgage contracts; the role of courts in administering or overseeing such
a program, including available judicial resources; fees and costs attendant to such
programs; and, in particular, critical issues surrounding the valuation by local
governments of complex contractual arrangements that are traded in national and
international markets.

INPUT

FHFA will accept input from any person with views on this subject through its
Office of General Counsel (OGC), no later than September 7, 2012, as the agency moves
forward with its deliberations on appropriate action. Communications may be addressed
to FHFA OGC, 400 Seventh Street SW., Eighth Floor, Washington, DC 20024, or
emailed to FHFA OGC at eminentdomainOGC@fhfa.gov. Communications to FHFA
may be made public.

Dated: August 6, 2012

Richard Hornsby,
Chief Operating Officer, Federal Housing Finance Agency.
[FR Doc. 2012-19566 Filed 08/08/2012 at 8:45 am; Publication Date: 08/09/2012]

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