Democrats frustrated that one of their own won't forgive billions in mortgages
Treasury Secretary Timothy Geithner and congressional Democrats blasted the Federal Housing Finance Agency on Tuesday after the regulator announced it would not allow Fannie Mae and Freddie Mac to offer loan principal reductions to struggling homeowners, as tensions over how to improve the sluggish housing market remain high before the November elections.
Democrats have been pressuring the FHFA, the independent agency in charge of overseeing the taxpayer supported mortgage giants, for months to back off its opposition to allowing Fannie and Freddie to provide some debt forgiveness to homeowners.
The regulator’s acting director, Edward DeMarco, has been unmoved by their arguments, and has infuriated some Democrats.
“It is incomprehensible that Mr. DeMarco would reject the chance to save up to a billion dollars in taxpayer funds while helping nearly half a million homeowners stay in their homes,” Rep. Elijah Cummings of Maryland, the top Democrat on the House Oversight and Government Reform Committee, said in a statement on Tuesday.
In the latest effort to entice DeMarco to move in the Obama administration’s direction, Treasury had proposed earlier this year allowing Fannie and Freddie to participate in a program where the cost of loan writedowns would be covered with remaining funds from the 2008 bank bailout law — the Troubled Asset Relief Program (TARP).
On Tuesday, DeMarco rejected the idea, arguing that his agency’s job is to protect taxpayers from losses resulting from the government’s rescue of Fannie and Freddie in 2008 and the proposed use of TARP funds does not address that concern.
“I have concluded that Fannie Mae and Freddie Mac’s adoption of [the Treasury program] would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers,” DeMarco wrote to lawmakers on Tuesday. . . .
DeMarco, acting director of the Federal Housing Finance Agency, said today that he won't allowFannie Mae and Freddie Mac to engage in debt relief for borrowers who owe much more than their homes are worth.
In doing so, DeMarco clearly put ideology ahead of economics, hindering the housing market's recovery in the process. . . .
You have to love the claims that giving away money is the way to save it.
The most mind-boggling aspect is that FHFA's own analysis shows principal reduction would save the taxpayer-backed mortgage giants as much as $3.6 billion compared with other modification efforts. . . . .