Letter to President Obama and Congressional leaders calls government home loan agencies an “obstacle to progress” for homeowners
BALTIMORE (March 18, 2013)—Attorney General Douglas F. Gansler today called Fannie Mae and Freddie Mac a “direct impediment to our economic recovery” by their continued refusal to offer principal relief for struggling homeowners. Attorney General Gansler, joined by nine other attorneys general, expressed his concerns in a letter to President Barack Obama and congressional leaders calling for new management to replace Edward DeMarco as Director of the Federal Housing Finance Agency (FHFA), created in 2008 as the regulator and conservator of Fannie Mae and Freddie Mac.
“This failure to assist struggling Maryland homeowners is hurting families still suffering from the housing crisis,” said Attorney General Gansler. “The Attorneys General National Mortgage Settlement has provided relief for over 14,000 Maryland families so far. At the same time, Fannie Mae and Freddie Mac are refusing to assist thousands more thus holding back the economic recovery for everyone.”
In the letter, the attorneys general argue that principal mark downs are a central component of the national settlement and continue to bring meaningful relief to distressed borrowers, spurring our nation’s economic recovery. In general, all loan modifications rely on a net-present value (NPV) analysis that serves the dual purpose of helping borrowers remain in their homes and meeting the economic interests of lenders and investors. The positive impact of mortgage modifications which often include principal writedowns continues to be felt on the housing market, economy and our local communities.
“Simply put, by refusing to allow for principal writedowns that would result in more loan modifications, FHFA stands as a direct impediment to our economic recovery,” wrote the attorneys general. “Unfortunately, under the leadership of Acting FHFA Director Edward DeMarco, Fannie Mae and Freddie Mac remain an obstacle to progress by refusing to adopt policies that will help maximize relief for homeowners. We believe that until new, permanent leadership is named to FHFA, they will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis.”
The FHFA's continued position that principal forgiveness conflicts with its goal of asset preservation is “not supported by reality,” the attorneys general assert in the letter. The agency’s current policy actually reduces the value of its holdings portfolio. It is far more profitable for any financial institution to hold a portfolio of performing $200,000 mortgages that keeps families in their homes than a portfolio of non-performing $250,000 mortgages headed toward default.
“We have worked tirelessly, along with our federal, state, and local partners to develop a multi-pronged approach to dealing with the foreclosure crisis,” the letter concludes. “Fannie Mae and Freddie Mac should be among our partners in this effort, and leaders in the arena of loan modification best practices. Instead, they have been an obstruction.”
To read the complete text of the letter visit: http://www.oag.state.md.us/Press/FHFA_joint_AG_letter.pdf
Source: Office of Attorney General Douglas F. Gansler