Rep. Lofgren and 115 Reps. Call for Fannie Mae and Freddie Mac to Help Underwater Homeowners Via Principal Reductions
Rep. Lofgren and 115 Reps. Call for Fannie Mae and Freddie Mac to Help Underwater Homeowners
Washington, DC – Today Rep. Zoe Lofgren, chair of the California Democratic Congressional Delegation, released a letter signed by 116 Members of Congress to Ed DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), calling for mortgage principal write-down relief for underwater homeowners. With support for swift action building, the Members of Congress told DeMarco, “Your unilateral decision to block all forms of principal write-down has prevented the housing market from recovering more quickly.”
For several years, economists and experts on the housing and securities markets have called for targeted write-downs in the balances of mortgage principal owed by some underwater homeowners. On January 6th William Dudley, President of the Federal Reserve Bank of New York, called on Fannie Mae and Freddie Mac to implement several different types of principal reductions. Mark Zandi, Chief Economist at Moody’s Analytics, said at a February 9th Senate Banking Committee hearing that encouraging more principal reductions offers “the best odds of ending the housing crash more quickly and definitively.” Many other leading authorities have made similar statements, including Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve; Martin Feldstein, Chairman of the Council of Economic Advisers under President Reagan; and Alan Blinder, former Vice Chairman of the Federal Reserve.
However, FHFA Acting Director DeMarco has refused to allow Fannie Mae and Freddie Mac to write down the principal balances of any underwater mortgages, even in cases where it can be demonstrated that doing so would yield the greatest long-term savings for taxpayers. The Government-Sponsored Enterprises (GSEs) under his conservatorship own or guarantee approximately sixty percent of the outstanding residential mortgages in the United States, including nearly three million underwater loans.
In the letter, the 116 Representatives urged FHFA Acting Director DeMarco to act: “Our country faces a national foreclosure crisis. The American people expect government officials, whether elected or part of the civil service, to solve the complex problems that our nation confronts. We therefore urge you to harness your agency’s powers, resources, and financial expertise to prevent more foreclosures and reduce negative equity.”
Copy of letter below…