Maryland Attorney General Douglas F. Gansler and nine other attorneys general sent a letter Monday to President Obama and the U.S. Senate’s leaders demanding new management at the government entity that oversees Fannie Mae and Freddie Mac.
The housing finance firms, which have been controlled by the federal government since 2008, have become an “obstruction” to economic recovery, said the letter signed by Gansler and the attorneys general of Massachusetts, New York, California, Delaware, Illinois, Nevada and Oregon.
The Federal Housing Finance Agency, which regulates Fannie and Freddie, should offer mortgage principal reductions to homeowners struggling to pay off their loans, the attorneys general said. Other financial institutions have brought relief to homeowners with reductions, they said.
“Simply put, by refusing to allow for principal writedowns that would result in more loan modifications, FHFA stands as a direct impediment to our economic recovery,” the letter said.
The attorneys general are asking Obama to replace Acting FHFA Director Edward DeMarco with a manager who will allow Fannie and Freddie to offer principal reductions.
DeMarco has said offering principal reductions would threaten the financial stability of Fannie and Freddie. That, the attorneys general said, is “not supported by reality.”
“The FHFA’s current policy actually reduces the value of its holdings portfolio,” their letter said. “It is far more profitable for any financial institution to hold a portfolio of performing $200,000 mortgages that keeps families in their homes than a portfolio of non-performing $250,000 mortgages headed toward default.”
“Fannie Mae and Freddie Mac are refusing to assist thousands … thus holding back the economic recovery for everyone,” Gansler said in a statement.
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