DeMarco Opponents Continue to Relentless Push for Replacement

by devteam April 4th, 2013 | Share

Two state’s attorneys general havernraised the public profile of their earlier requests that Edward DeMarco, actingrndirector of the Federal Housing Finance Agency (FHFA) be replaced.  New York Attorney General Eric T.rnSchneiderman and his Massachusetts counterpart Martha Coakley published anrnop-ed piece in the on-line magazine Politico</itoday explaining the reasons they and seven other attorneys general demandedrnDeMarco's ouster in letters sent last month to the President and leaders ofrnboth parties in the House and Senate.</p

Schneidermanrnand Coakley wrote in Politico thatrnthey believe DeMarco “is standing in the way of progressrntoward a full economic recovery and hurting families across the country.”  They cite his repeated refusals to allow FanniernMae and Freddie, which are in conservatorship under his agency, to make principalrnwrite-downs for underwater mortgages.  ” At a House Financial ServicesrnCommittee hearing last week, DeMarco was questioned by Congress and confrontedrnby protesters calling for mortgage principal reduction, but he again refused tornchange his position,” they wrote, calling it a failed policy that is a directrnimpediment to economic recovery and standing in the way of efforts to providernmuch-needed assistance to homeowners across the country. </p

The attorney’s general said that thernnational mortgage settlement in which 49 states participated has deliveredrnbillions in relief to homeowners at risk of foreclosure including over $17rnbillion in mortgage principal reductions. “We are working to get more reliefrnfrom lenders in the private sector,” Schneiderman and Coakley write, “but thesernefforts are undercut by DeMarco’s refusal to cooperate. The reality is, morernthan half of all mortgages in America are owned or guaranteed by Fannie Mae orrnFreddie Mac.”</p

They point to a study within FHFArnthat found overall positive results would come from principal reduction butrnDeMarco continues to argue that principal reductions would weaken the financesrnof FHFA and produce a financial loss for taxpayers.  The two contend these are two separaternquestions, only one of which is DeMarco’s responsibility.  “He is responsible for the fiscal health ofrnhis agency. FHFA estimated that it would come out ahead by $3.7 billion fromrnthe administration’s plan because of the aid from the Treasury Department. It’srnlikely that taxpayers as a whole will come out ahead as well. But even if theyrndon’t, if the administration opts to use public resources to support a policyrnthat prevents foreclosures, stimulates the economy and creates jobs, it’s notrnthe place of an acting agency head to stand in the way.”</p

In addition to reducing thernincidence of foreclosure the article says that principal reduction actually canrnincrease the lifetime value of a mortgage by reducing the likelihood of defaultrnand it is far more profitable for any financial institution to hold a portfoliornof performing $200,000 mortgages that keep families in their homes than arnportfolio of nonperforming $250,000 mortgages headed toward default. Finallyrnthey argue that homeowners with mortgages owned or guaranteed by Fannie Mae andrnFreddie Mac deserve the same help as private mortgage servicers have begun tornprovide to their borrowers. </p

“The president can unlock the door forrnhis own very sensible policy, and potentially open doors for millions ofrnjob-seekers as well, by appointing a new director at FHFA,” the articlernconcludes. “For Americans who are fed up with Washington obstructionistsrnholding back help for the middle class, this is one obstruction the presidentrnshould be eager to remove.”

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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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