Prominent state attorneys general are calling on Capitol Hill to remove Ed DeMarco, the acting director of the Federal Housing Finance Agency, urging for a new permanent director.
Attorneys general are pressing President Barack Obama to replace the FHFA head because they believe his views stand as a "direct impediment to our economic recovery," according to a letter headed by Massachusetts Attorney General Martha Coakley and New York Attorney General Eric Schneiderman.
"Under the leadership of Acting FHFA Director Edward DeMarco, Fannie Mae and Freddie Mac remain an obstacle to progress by refusing to adopt policies that will help maximize relief for struggling homeowners," Schneiderman said.
He added, "The time has come for the President and Congress to work together to install a new, permanent leader at FHFA that will be a partner, not an impediment, in the national effort to comprehensively address the foreclosure crisis."
The issue at hand is the continued refusal of the FHFA to allow principal reductions on loans owned or guaranteed by the government-sponsored enterprises.
The group argued that the FHFA’s position that principal forgiveness conflicts with its goal of "asset preservation is not supported by reality."
"The FHFA’s current policy actually reduces the value of its holdings portfolio. 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 nonperforming $250,000 mortgages headed toward default," the letter explained.
Furthermore, Schneiderman argues that writing down the principal of underwater mortgages would aid the housing recovery, noting that writedowns were a central part of the national mortgage settlement that 49 state attorneys general negotiated with five banking giants.
"The FHFA’s refusal to allow for principal write-downs that would result in more loan modifications is a direct impediment to our economic recovery and stands in way of our efforts to provide much needed assistance to homeowners in New York and across the country," the attorney general explained.
Additionally, the attorneys general expressed their efforts to work alongside the federal, state and local partners in developing a "multi-pronged approach" in dealing with the foreclosure process and believe Fannie Mae and Freddie Mac should be partners in their efforts.
However, the AGs are actually calling the GSEs an "obstruction" to foreclosure prevention.
"We believe that until new, permanent leadership is named to FHFA, they will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis," the letter stated.
The guessing game of potential nominee predictions to succeed DeMarco continues to fuel the market’s fire, with some suggesting an academic would be a sufficient replacement and others casting a vote for Ted Tozer, president of Ginnie Mae.
Regardless of who steps in and succeeds DeMarco, the subject of principal forgiveness is expected to be on the top list of priorities.
On a similar note, an advocacy group called the New Bottom Line is the ringleader for the campaign, "Dump DeMarco," petitioning for the acting director to be replaced.
Over the past week, the petition has received more than 1,800 signatures.
"Millions of families are being kicked out of their homes and communities destroyed because of this one man," said Tracy Van Slyke, director of The New Bottom Line. "It’s time they dump DeMarco and move for a permanent director who will support principal reduction and work for homeowners and taxpayers."