The regulator of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. has reaffirmed his opposition to principal writedowns. A decision not to implement a federal loan modification program for the government sponsored enterprises was made because it didn’t meet the objectives of their conservatorships.
Fannie Mae and Freddie Mac will not be directed by the Federal Housing Finance Agency to implement the Home Affordable Modification Program Principal Reduction Alternative, according to a statement issued Tuesday.
| The position taken by FHFA Acting Director Edward J. DeMarco, who is already in the hot seat for not using Fannie and Freddie to write down principal on loans to underwater homeowners, is likely to fan the flames.
The decision, which considered incentive payments from the Troubled Asset Relief Program offered through the Department of the Treasury, was made after “extensive analysis of the revised HAMP principal reduction alternative.” “FHFA concluded that HAMP PRA did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today,” DeMarco said.His position on such modifications is highly unpopular with the Obama administration and many Democrats. Mortgage Bankers Association President and Chief Executive Officer David H. Stevens said that the Washington, D.C.-based trade group agrees “that principal forbearance can help borrowers realize a payment reduction in a similar way as principal reduction.” DeMarco, whose agency also supervises the Federal Home Loan Banks, oversees roughly half of the nation’s collective $10 trillion mortgage portfolio. Fannie’s book of business finished May at $3.2 trillion, while Freddie reported a total mortgage portfolio of $2.0 trillion as of June 30.
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sketch of Edward DeMarco by Stephen J. McConnell |
DeMarco also addressed the issue of GSE repurchase provisions with lawmakers.
Many publicly traded banks have recently reported that Fannie has been more aggressive in interpreting what constitutes a valid reason to issue a repurchase demand.
DeMarco said that he previewed consistent policies for lender representations and warranties for Congress among several housing-related initiatives.
