House Democrats Push for Principal Reduction in Fiscal Cliff Negotiations

Nineteen members of the House ofrnRepresentatives sent a letter today to President Obama and leaders of both partiesrnin the House and Senate urging the expansion of assistance to homeowners, somern10.8 million of whom have homes that are underwater, as part of any resolutionrnof the so-called fiscal cliff.  </p

The letter said in part, “Given thernclear benefits of providing assistance to underwater borrowers, as well as thernsignificant savings for the American taxpayers, we believe that provisionsrnexpanding such assistance should be part of any deal to resolve the fiscalrncliff.  At a minimum, such legislationrnshould require that Fannie Mae and Freddie Mac offer principal reduction loanrnmodifications to borrowers who are net present value positive.”</p

One of the letter’s signers, ElijahrnCummings (D-MD) has been a frequent critic of the Federal Housing FinancernAgency’s (FHFA) stance toward principal reduction.  FHFA, conservator of Fannie Mae and FreddiernMac, has refused to permit the two GSEs to include principal reduction in loanrnmodification proposals.  Cummings hasrnengaged in frequent contentious exchanges on the issue with FHFA’s ActingrnDirector Edward J. DeMarco.</p

The letter references a July studyrnconducted by FHFA that showed that principal reduction modifications through the Making Home Affordable program ifrnmade available to Freddie and Fannie’s borrowers could help as many as a halfrnmillion homeowners and save the GSEs up to $3.6 billion and taxpayers as muchrnas $1 billion.</p

Cumming’srnoffice said today’s letter is consistent with a proposal presented to Congress by the Obama Administration onrnNovember 29, 2012, which would avert the fiscal cliff by raising $1.6 trillionrnin revenues over the next ten years and investing $50 billion in stimulusrnspending to continue the economic recovery, including provisions specificallyrnrelated to assisting struggling homeowners and addressing the nationwidernforeclosure crisis.</p

In addition to the President the letter was sent to House Speaker JohnrnBoehner, House Minority Leader Nancy Pelosi and Majority Leader Eric Cantor,rnand Senate Majority and Minority Leaders Harry Reid and Mitch McConnell.  Cummings was joined in signing the letter by Reps.rnDavid Cicilline, Mike Thompson, John Lewis, Brad Miller, Keith Ellison, ZoernLofgren, Raul Grijalva, Mike Honda, George Miller, John Tierney, Barbara Lee,rnMel Watt, Jan Schakowsky, Barney Frank, Laura Richardson, Lynn Woolsey, MarciarnFudge, and Ed Towns.

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