HUD, which took a proactive stance on the controversial doctrine of "disparate impact," issuing regulations that codified the criticized doctrine in order to attempt to require the federal courts that construe it to give HUD's interpretation judicial deference, has decided that when it comes to the equally controversial scheme of a number of municipalities to "condemn" underwater residential mortgage loans, HUD must remain "neutral."
Housing and Urban Development Secretary Shaun Donovan kept his carefully neutral stance this week on the potential use of eminent domain to restructure underwater mortgages.
Mortgage and housing industry groups have asked HUD to rule that Federal Housing Administration-insured loans will not be used to refinance mortgages on properties that are condemned and seized by local government under eminent domain.
But Donovan said that the use of eminent domain to force the sale of private-label mortgages out of securitized trusts must be decided by the courts.
There are very specific rules about the use of eminent domain, Donovan said at a Politico event Wednesday, and “it needs to be decided by the courts.”
The application of the doctrine of disparate impact to fair lending laws must also be decided by the courts. That fact hasn't stopped HUD from issuing regulations on the subject. The least the agency could do is to take a stand on the potentially detrimental impact on the residential mortgage lending business, including FHA mortgages, caused by the use of eminent domain to sieze mortgage loans from lenders. The FHFA has weighed in to protect its interests, which happen to be aligned with the lenders from who FNMA and FHLMC buy loans. Why can't HUD?
Perhaps the fact that the expansion of the conflating the disparate impact doctrine into the fair lending arena and a creating a crackpot scheme like condemning mortgage loans are both anti-lender, pro-populist theories dreamed up by Leftist activists might have something to do with it. In HUD's case, as in the FHFA's, hurting lenders harms the agency, so the laws of self-interest would seem to dictate that HUD oppose both of them. Ultimately, however, the losses of HUD are back-stopped by the US taxpayer, and as we all know, neither side of the political spectrum has been overly concerned with taxpayers when it comes to serving a "higher cause."