The mortgage bond investor community is highly opposed to the proposed use of eminent domain to seize mortgages. Nonetheless, the concept is spreading and three Congressmen went on the record to say they agree with investors.

"We are concerned that the proposed use of eminent domain would slow the return of private capital to the housing finance system, and threaten our fragile housing recovery," write California House Republicans John Campbell, Gary G. Miller and Ed Royce in a letter to Housing and Urban Development Secretary Shaun Donovan.

"We do not believe this is appropriate public policy, even if this use of eminent domain were to survive the inevitable legal challenges that would follow any decision to seize mortgages," they add.

A number of securitization trade groups sounded the alarm when Mortgage Resolution Partners entered into contracts with two additional municipalities: Richmond, Calif., and North Las Vegas, Nev., to create eminent domain programs earlier this week.

The Las Vegas City Council met last night to discuss MRP’s proposal and may be voting on whether to use it next week.

In response to the growing acceptance of this practice, trade groups are on the offensive, appealing to lawmakers and policymakers to explain why such practices may be illegal and detrimental to the local housing markets.

MRP states that the use of eminent domain would reduce the severity of negative equity in the nation's hardest-hit communities, and use this map by Zillow (Z) to illustrate the extent of the problem.