Attorneys General said to Call for DeMarco Replacement

by devteam March 18th, 2013 | Share

The New York Times reported onrnSunday that a number of state Attorneys General have called for the removal of<bEdward J. DeMarco from his position as Acting Director of the Federal HousingrnFinance Agency (FHFA).  According to thernreport written by Annie Lowrey a letter was apparently sent to the White Housernby a group headed by Massachusetts’ AG Martha Coakley and New York’s EricrnSchneiderman and signed by a number of others including Kamala D. Harris ofrnCalifornia, Beau Biden of Delaware, Lisa Madigan of Illinois, Douglas F. Ganslerrnof Maryland, Catherine Cortez Masto of Nevada and Bob Ferguson of Washington. </p

At issue is the continued refusal of DeMarco, who has been Acting Directorrnsince 2009, to allow principal reductions on loans owned or guaranteed by FreddiernMac and Fannie Mae, the two government sponsored enterprises in conservatorshiprnunder FHFA.  Principal reduction isrnwidely used by lenders as one method of modifying mortgages that arerndelinquent, especially those in which the borrower owes more on the loan thanrnthe property is worth.  Coakley hadrncalled for DeMarco’s dismissal in February saying he is blocking efforts thatrnwould help struggling homeowners avoid foreclosure.</p

The Home Affordable Modification Program (HAMP) sponsored by the Departmentsrnof Treasury and Housing and Urban Development have been pushing its PRA (PrincipalrnReduction Alternative) component among private lenders participating in thernprogram and about a year ago Treasury boosted the incentive it gives them forrndoing so.  At the same time it stronglyrnurged DeMarco to allow the GSEs to participate also offering increasedrnincentives for them to do so.  Principalrnreduction has also been the source of some testy exchanges between DeMarco andrnDemocratic members of the House Financial Services Committee, especiallyrnRepresentative Elijah Cummings (D-MD). rnLast month 45 Democratic House members led by Cummings also askedrnPresident Obama to appoint a permanent head of FHFA.</p

According to The Times thernAttorneys General noted that principal reductions are a central part of arnmultibillion-dollar mortgage settlement that 49 state attorneys generalrnnegotiated with five major banks a year ago.  It quotes Coakley as saying in a statement, “Ourrnnation’s economy will never fully recover until we address this foreclosurerncrisis. Fannie Mae and Freddie Mac have been an obstacle to progress for farrntoo long, and it is time for new leadership and a new direction to ensure thatrnhomeowners receive this important relief.” </p

The Wall Street Journal reportedrnlast month that the President was ready to appoint a successor to DeMarco butrnsources in the administration have said it is unlikely that he can obtainrnconfirmation for a replacement who differs from DeMarco on principal reductionrnwhich Republicans in the Senate also oppose and that an interim replacementrnwould be necessary.  Early in President Obama’srnfirst term the Senate refused to bring the name of Joseph Smith, his first FHFArndirector nominee, to the floor for an up or down vote.</p

FHFA conducted an analysis last year which many of DeMarco’s critics saidrnshowed that a properly conducted principal reduction program would actuallyrnsave the GSEs money but DeMarco has repeatedly rejected the idea saying it runsrncontrary to FHFA’s mandate as conservator to preserve the GSEs assets and saverntaxpayer money.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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