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Federal Housing Finance Agency head Edward DeMarco said the agency will likely make a decision regarding mortgage principal forgiveness sometime in April.
DeMarco, in a speech Wednesday before the Boston Security Analysts Society, said the FHFA continues to evaluate added incentives from the Treasury Department to write down loan principal under the Home Affordable Modification Program.
The Treasury announced in January that it would triple those incentive payments for mortgage investors, and Freddie Mac CEO Charles “Ed” Haldeman signaled the change could push the government-sponsored enterprises to cut mortgage principal.
But DeMarco continued his wary stance toward write-downs Wednesday, and said principal forbearance “produces the same, lower monthly payment.” That’s the main reason to modify a loan, he said.
More than three in four “deeply underwater” borrowers on the GSEs' books are current on their loans, DeMarco said.
“Indeed, we have found that payment reduction, not loan-to-value, is the key indicator of success in loan modification,” DeMarco said in prepared remarks. “If the borrower remains successful in this modified loan, this approach preserves for taxpayers an ultimate recovery on the debt.”
Others, including many House and Senate Democrats, want DeMarco to go forward with write-downs, while the less patient have called for his ouster.
Thirty senators, in a letter Wednesday, asked DeMarco to revise how the FHFA conducts its principal reduction analysis. The FHFA's previous report, which said write-downs would cost the GSEs $100 billion, had “several critical flaws," they said.
“We seek an accurate analysis, but not a particular result,” the senators said in the letter. “Conducting an accurate analysis of this issue is not only part of your responsibility as conservator to conserve taxpayer assets, but also part of your statutory responsibility to maximize assistance for homeowners to minimize foreclosures.”
Sen. Richard Shelby, R-Ala., who is the ranking member of the Senate Banking Committee, came out in defense of DeMarco, questioning Democrats’ own efforts.
“Democrats should stop blaming FHFA for their failure to craft bipartisan legislation to address the housing crisis,” Shelby said in an emailed statement. “FHFA has refinanced over 10 million mortgages since 2009. What have the Senate Democrats accomplished during that same time frame?”
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