7/31/12 - Combination of various media sources:
DeMarco Refuses Again to have GSE's do HAMP principal reductions.
Of course he is the Republican guy Obama can't get rid of.
Despite the fact that FHFA analysts concluded that forgiving certain mortgage debts could save public money, DeMarco said he would not allow it because of the “costs and risks”—he is particularly concerned that people might strategically default to qualify for help.
This is a nonsense argument—as Treasury Secretary Timothy Geithner pointed out in a letter to DeMarco
Despite the consistent worry of financial elites, strategic default has never been a hazard in principal-reduction efforts—via Jared Bernstein, we see that nobody is strategically defaulting to get relief under the national mortgage settlement:
But bankers always worry about these phantom defaulters. “This is something you often see among bankers and lenders who view any sort of write down as the unacceptable breaking of a contract,” notes Bernstein.
“Not the Best Decision”
Treasury Secretary Timothy Geithner said he is concerned about the FHFA's “continued opposition” to allowing Fannie Mae and Freddie Mac to use targeted principal reduction in their loan modification programs. Writing to DeMarco July 31, 2012, Geithner said the FHFA position was “not the best decision for the country” as it would fail to provide much needed help to a significant number of homeowners.
Geithner is of the opinion that the proposed reduction could see the Government Sponsored Enterprises (GSE) save up to $3.6 billion, contrary to the standard modification process.
Democratic critics—who have for months been hammering DeMarco for his obstinacy—are now focusing on his apparently ideological opposition to principal write-downs. “We are five years into the housing crisis, and FHFA remains paralyzed by the fear that somehow homeowners innocently trapped in the worst economy since the Great Depression are going to weasel out of paying every penny on their mortgage that they could,” said Representative Brad Miller in a statement.
Reaction to the FHFA's action fell along party lines, with Republican lawmakers supporting the FHFA's decision.
Sen. Bob Corker, R-Tenn., a member of the Banking Committee, issued a statement “thank[ing] Ed DeMarco for making his decision based on objective analysis and with the taxpayer in mind.” Sen. Pat Toomey, R-Pa., added, “Acting Director DeMarco deserves to be commended for insisting on conserving the government-sponsored enterprises' assets and protecting taxpayers from the risk of an even bigger Fannie and Freddie bailout. Undoubtedly, he came under considerable pressure from this administration, but Acting Director DeMarco did the right thing today by putting taxpayers' interests ahead of election-year politics.”
Rep. Scott Garrett, R-N.J., Chairman of the House on Subcommittee on Capital Markets and Government-Sponsored Enterprises, also thanked Director DeMarco “I praise Director DeMarco's decision to protect the American taxpayer by preventing the Obama Administration from continuing to exploit the bailout of the GSEs to push their own social housing goals.”
Rep. Darrell Issa, R-Calif., Chairman of House Oversight and Government Reform Committee, noted, “Today's decision by Acting Director DeMarco protects taxpayers from picking up even more costs to bailout Fannie Mae and Freddie Mac's bad financial bets. Other policies, such as temporarily reducing payments have been shown to be much more effective and cost efficient than principal write-downs. This now rejected spending proposal, which Obama Administration officials have touted, would not have made a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers. Acting Director DeMarco should be commended for maintaining organizational and regulatory independence and resisting efforts to politicize federal housing policy in an election year.”
House and Senate Democrats were critical of the FHFA's decision.
Sen. Robert Menendez, D-N.J., Chairman of the Senate Subcommittee on Housing, Transportation, and Community Development, stated, “This is a terrible decision and one that underscores Mr. DeMarco's intransigence when it comes to debt forgiveness for homeowners--even as his own analysis shows the benefit to taxpayers.” He added, “Making decisions based on ideology rather than fact could cost Fannie, Freddie, and taxpayers billions of dollars...Taxpayers and homeowners deserve fair and complete answers, not shoddy analysis that is driven by ideology and ignores obvious solutions like shared appreciation.”
Sen. Jack Reed, D-R.I., commented, “This seems to be a case of what's good for the goose is not good for the gander. The Acting Director has okayed principal reduction for Fannie and Freddie under Hardest Hit, but won't for other Americans.
Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform stated, “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...He should immediately withdraw this reckless and misguided letter and start following the law Congress passed.”
Dave notes the funding part of TARP has already been authorized but Republicans want to cut funding and end all of HAMP related needless bailouts of irresponsible homeowners. The banks got bailed out, repaid with huge profit to taxpayers, make billions on fees for doing foreclosures while when GSO backed Fannie/Freddie take the loss on foreclosure sales and all the bank fees for holding, selling etc.