A coalition of nine state attorneys general is petitioning the national government to replace Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco. The coalition charged DeMarco with positioning Fannie Mae and Freddie Mac as a “direct impediment to our economic recovery” and called for his replacement in a joint letter to the president, the Senate majority leader, and the Senate minority leader Friday.
“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,” said New York Attorney General Eric T. Schneiderman, one of the coalition members.
The attorneys’ general complaint stems from DeMarco’s refusal to allow the GSEs to engage in principal reductions for struggling and underwater homeowners.
The issue of principal reductions has led to a contentious and lengthy debate between DeMarco and other government
officials, with DeMarco remaining firm in his stance that principal reductions are not in the best interest of the GSEs.
The attorneys general argued that principal forgiveness is beneficial to homeowners, financial institutions, and the economy overall. They pointed out that this strategy is a key part of last year’s National Mortgage Settlement and assert that the FHFA’s aversion to the practice “is inconsistent with its combined goal of asset preservation and foreclosure prevention.”
The attorneys general suggested a portfolio of $200,000 loans that are performing is “far more profitable” than a portfolio of $250,000 non-performing loans.
DeMarco’s insistence that principal forgiveness does not support the goal of asset preservation “is not supported by reality,” the attorneys general stated in their letter.
The coalition includes Schneiderman, one of the leaders of last year’s National Mortgage Settlement, along with Massachussetts Attorney General Martha Coakley and California Attorney General Kamala D. Harris, who have also been outspoken about the foreclosure crisis.
Attorneys general from Delaware, Illinois, Maryland, Nevada, Oregon, and Washington also participated in the coalition and signed Friday’s letter.
“We believe that until new, permanent leadership is named to FHFA, [the GSEs] will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis,” the letter stated in its closing line.
The letter is one of several pleas to install new FHFA leadership. Just last month, 45 members of the House of Representatives sent a letter to the president, urging for DeMarco to be replaced.
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