Freddie Mac’s top lawyer threatened to file suit against municipalities that attempt to use eminent domain to refinance underwater mortgages.
“We would consider taking legal action,” William McDavid, Freddie’s general counsel, said Wednesday on a second- quarter earnings call. “Our sense is that those so-called voluntary loan sales would not be very voluntary. They’d be loan sales under pressure, under a threat of seizure by eminent domain.”
The comments were in response to actions taken last week by the city of Richmond, Calif., near San Francisco. The city sent intent letters to 32 trustees and servicers asking to buy roughly 600 underwater loans at reduced prices or face possible seizure through eminent domain.