Coakley Leads National Push for New Leadership at Fannie and Freddie
Thursday, March 21, 2013
Coakley, New York Attorney General Eric Schneiderman and seven other attorneys general sent a letter Friday calling for a new permanent replacement for Edward DeMarco as Director of the Federal Housing Finance Agency (FHFA). In their letter, Coakley and her fellow AGs called Fannie Mae and Freddie Mac a “direct impediment to our economic recovery” for their continued refusal to give principal relief to struggling homeowners.
“Our nation’s economy will never fully recover until we address this foreclosure crisis,” Coakley said. “Fannie Mae and Freddie Mac have been an obstacle to progress for far too long, and it is time for new leadership and a new direction to ensure that homeowners receive the relief they deserve.”
The group of AGs argued that principal reductions were a central component of the national mortgage settlement and that they continue to bring meaningful relief to distressed borrowers, thereby spurring the country's economic recovery.
When it comes to loan modifications, all changes rely on a net-present value (NPV) analysis that serves the dual purposes 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 reductions, continues to be felt on the housing market, economy and our local communities.
This contrasts sharply with the FHFA maintaining the position that principal forgiveness conflicts with its goal of asset preservation, a view “not supported by reality,” the attorneys general assert in their letter.
“The agency’s current policy actually reduces the value of its holdings portfolio,” the letter states. “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.”
Last week's letter is not the first time Coakley has called for either new leadership or the implementation of principal reductions by Fannie Mae and Freddie Mac. In February of last year, she urged the FHFA to engage in loan modifications guided by a NPV analysis in order to help stabilize the housing market and economy. Then in April, Coakley and 10 other state attorneys general sent a letter to DeMarco seeking relief for homeowners, arguing that the failure to implement principal loan forgiveness was harming struggling homeowners and investors.
Again, in August 2012, Coakley sent a letter to DeMarco stating that Fannie Mae and Freddie Mac were required to offer principal reductions as a commercially reasonable tool under the new Massachusetts loan modification statute. The Massachusetts law, signed by Governor Deval Patrick on August 3, 2012, requires creditors to take commercially reasonable steps to avoid foreclosure upon certain mortgage loans.
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