Rep. John Campbell (R-California) introduced to Congress a piece of legislation designed to keep local governments from using eminent domain to seize homes with underwater mortgages.

Titled “The Defending American Taxpayers from Abusive Government Takings Act,” the bill would prohibit Fannie Mae, Freddie Mac, FHA, and the Veterans Administration from purchasing or guaranteeing loans originating in counties where a municipality has seized a mortgage loan through eminent domain in the last decade.

Campbell said the act is intended to protect taxpayers’ investments and preserve the rule of law.

“There is no question that we need to take steps to assist American homeowners in distress,” Campbell said in his introduction of the legislation.

“But these steps must not undermine rule of law, must not engage in corruptive and abusive practices, must protect the American taxpayer, and must not further degrade the housing market,” he continued.

In a release, Campbell’s office points out that widespread use of eminent domain powers to seize mortgage loans may result in Fannie and Freddie losing up to 30 percent in the private-label residential mortgage-backed securities in their portfolios.

As an alternative to the eminent domain program, Campbell and Rep. Gary Peters (D-Michigan) introduced H.R. 5940, “The Preserving American Homeownership Act.” This bill would direct Fannie/Freddie conservator FHFA to establish a program to pilot principal reduction programs for loans owned or guaranteed by the GSEs.

Campbell’s bill has already seen support from the Mortgage Bankers Association (MBA).

“While the problem of underwater borrowers continues to slow the housing recovery, using eminent domain to take those mortgages is not a responsible answer,” said MBA president and CEO David Stevens. “Beyond the obvious legal issues of using eminent domain in such a radical way, the government seizing mortgages would set a precedent that will hurt those communities and borrowers it is most designed to help.”

The Defending American Taxpayers from Abusive Government Takings Act is currently awaiting consideration in the House Committee on Financial Services.