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Three Massachusetts congressmen are asking the Federal Housing Finance Agency to reconsider options in loan modifications, saying the regulator hasn't done enough to help homeowners.
Reps. Barney Frank, Michael Capuano and Stephen Lynch, all Democrats and members of the House Financial Services Committee, wrote in a letter to FHFA Acting Director Ed DeMarco that despite different options, "there is no question that action is better than inaction."
Frank, ranking member of the committee, said in an interview with HousingWire Tuesday that he supports principal write-downs, along with additional modification and refinancing options. Capuano and Lynch in the letter do not outright back mortgage principal modifications, which would alter the actual amount due on the loan.
DeMarco heads "a public agency" with "public money," Frank said, adding that DeMarco's broadest duty is to help the economy.
"He is withholding his support for getting a significant piece of getting this recovery going," Frank said. "It's moving, but he can make it better. As the recovery picks up speed, the FHFA is a beneficiary because they own more houses than anybody."
The three congressmen wrote to DeMarco that the statute that created the FHFA in 2008 does not require "you to withhold your cooperation from this effort to the extent that you have." Frank was chairman of the financial services committee at that time, while Capuano and Lynch were members.
The FHFA is the conservator for Fannie Mae and Freddie Mac.
"There's nothing in the mission of the FHFA that keeps him from doing this," Frank said. "That's his choice."
The letter to DeMarco backs another signed last week from Massachusetts Attorney General Martha Coakley. In that letter to DeMarco, she wrote that the GSEs' "unwillingness" to participate in principal write-down is "troubling."
California AG Kamala Harris said in November she supports principal modifications, calling them a "common-sense reform."
DeMarco resisted calls for principal write-downs in part on grounds they would cost taxpayers too much. A January analysis from the FHFA estimated reductions on GSE loans would cost Fannie and Freddie more than $100 billion, on top of the $151 billion they owe in federal bailouts as of the end of the third quarter.
That estimate doesn't take into account any potential benefit to home prices or the economy, Frank said. Nor does it include any costs of defaulting homeowners. Though he said principal write-downs don't always help borrowers avoid default. About 4.1 million borrowers are at least 30-days late on their mortgage, according to Lender Processing Services ($29.55 0.55%).
The three Massachusetts House members said it's important to protect taxpayers, but they're "exposed to further problems when efforts that could enhance the pace of economic recovery" are not pursued by the FHFA.
DeMarco, the agency's acting director since August 2009, has drawn fire from legislators for his positions on principal modifications at the GSEs. House Democrats from California asked President Barack Obama to recess appoint a permanent director to replace DeMarco, similar his installation of Richard Cordray as director of the Consumer Financial Protection Bureau.
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