TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/81279
THE LATEST ORIGINATION "Forgiving debt owed pursuant to a lawful, valid contract risks creating a longer-term view by investors that the mortgage contract is less secure than ever before." — Edward DeMarco DeMarco's Principal Reductions Stance Prompts Dissent Commentary from the industry and legislators displays conflicting opinions regarding decisions from the FHFA's acting director. I (FHFA), has reconfirmed the idea that he does not support principal reductions and does not endorse their use at Fannie Mae and Freddie Mac. After clarifying his position, he n a long-running debate, Edward DeMarco, acting director of the Federal Housing Finance Agency use targeted principal reduction in their loan modification programs." Geithner's letter stated bluntly, "I do not believe it is the best decision for the country." He pointed to the FHFA's own immediately faced criticism and opposition from a broad spectrum of individuals, especially through- out the government. However, DeMarco's decision received a few words of praise as well. Treasury Secretary Tim Geithner, who formerly op- posed principal reductions, sent DeMarco a letter stating his concern at DeMarco's "continued opposition to allowing Fannie Mae and Freddie Mac (GSEs) to 42 | THE M REPORT ment, Jared Bernstein, senior fel- low at the Center on Budget and Policy Priorities, told Reuters, "In unusual times, like the aftermath mist Paul Krugman to criticize DeMarco's aversion to the strat- egy, reducing DeMarco's argu- ment to "because he doesn't feel like it." Krugman also called into question whether DeMarco is fit for his role. In a similarly candid state- analysis for evidence that principal reductions could save the GSEs as much as $3.6 billion and could save taxpayers up to $1 billion. This evidence has led econo- of the worst housing bubble im- plosion in decades with 30-plus- percent price declines, guess what? Write-downs happen." In DeMarco's letter to Congress stating his position on the matter, he expresses con- cern regarding the "long-term consequences for mortgage credit availability." "Forgiving debt owed pursuant to a lawful, valid contract risks creating a longer-term view by in- vestors that the mortgage contract is less secure than ever before," DeMarco stated. This uncertainty would lead to "higher mortgage rates, a constriction in mortgage credit lending, or both," he said. David H. Stevens, presi- dent of the Mortgage Bankers Association released a statement expressing the trade group's stance on the issue. "FHFA has made the determination that the long-term national costs of a widespread principal reduction program are unlikely to out- weigh what may be a short-term gain for a few select borrowers in certain states," he said. "We agree that principal forbearance can help borrowers realize a payment reduction in a similar way as principal reduc- tion. It is critical to implement solutions that help the American homeowner without incurring the negative long-term impact of making credit less available and more expensive," he continued. Sen. Bachus (R-Alabama) released a statement support- ing DeMarco's unwavering stance. He went so far as to say DeMarco "deserves praise for standing up for the best interests of the American people." "Everyone knows a job is the ernment programs, the presi- dent should work with us on bipartisan solutions that help create jobs and heal the housing market," he added. best foreclosure mitigation plan," Bachus stated. "Instead of more failed gov- SECONDARY MARKET ANALYTICS SERVICING ORIGINATION