The FHFA stands firm
The Federal Housing Finance Agency (FHFA), the conservator of Fannie Mae and Freddie Mac told lawmakers in a letter today that forcing the two to write down the principle on underwater home loans would require more than $100 billion in new taxpayer funds.
With one in five homes in America underwater, negative equity now totals over $750 billion, which the FHFA says would be more costly than forbearance.
FHFA has been called by lawmakers to answer the problem of underwater borrowers with principle reductions being the most common answer pushed by politicians these days, with various leaders, criticizing the FHFA for not taking action. The regulator wrote today that the decision has not been made in light of Fannie and Freddie already having borrowed $169 billion from taxpayers.
FHFA director, Edward DeMarco wrties, “FHFA has a statutory responsibility as conservator to preserve and conserve the assets and property of the regulated entities.”
DeMarco added, “Given that any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action.”
DeMarco also pointed out that additional costs of a principle reduction program is the need to borrow even more money to train servicers for the program and pay for the required technology to run the program, reiterating that forbearance is a less expensive option.
As lawmakers, regulators, banks and consumers scratch and claw their way toward an answer to solving the housing crisis, heads will continue to butt.