Miller, Thompson step up fight for homeowners, pressure federal regulator to stop blocking principal writedowns

Congressmen call for an end to policy blocking modifications at Fannie Mae and Freddie Mac that could save taxpayers billions

Washington, DC – February 28, 2012 – (RealEstateRama) — Amid the continuing national foreclosure crisis that has impacted millions of Americans, a unilateral decision by Federal Housing Finance Agency (FHFA) to block all forms of principal write-down for loans backed by Fannie Mae and Freddie Mac has prevented the housing market from recovering more quickly, said U.S. Reps. George Miller (D-Martinez) and Mike Thompson (D-St. Helena), who today ramped up pressure on the FHFA to reverse the decision that has stymied a more buoyant housing recovery.

Miller and Thompson joined Rep. Zoe Lofgren (D-San Jose) and over 110 Democratic Members of Congress in writing to FHFA Acting Director Ed DeMarco today urging him to allow Fannie Mae and Freddie Mac to engage in principal forgiveness in cases where it benefits both homeowners and taxpayers. DeMarco has categorically prevented principal reduction on Fannie- and Freddie-backed loans despite the fact that his own analysis shows that a properly structured principal reduction program could save billions of taxpayer dollars compared to sending underwater homeowners into foreclosure.

The lawmakers wrote, “Despite this weight of expert opinion, you have refused to permit Fannie Mae and Freddie Mac to write down the principal balances of any underwater mortgages, even in cases where it can be demonstrated that doing so would yield the greatest long-term savings for taxpayers… Your unilateral decision to block all forms of principal write-down has prevented the housing market from recovering more quickly.”

Miller, who helped lead the charge on the issue among his colleagues, said “We cannot allow this crisis to continue. It’s time for Director DeMarco to get to work on stabilizing the housing market and providing real help to homeowners. It makes no sense to send families in the Bay Area and across the country into foreclosure simply because one regulator is ideologically opposed to solutions that work better for everyone. This is a serious issue for too many families and for our country – the FHFA should take it seriously as well.”

“The FHFA’s refusal to help underwater homeowners is slowing our economic recovery and costing taxpayers billions of dollars as more and more homes are sent into foreclosure,” said Thompson. “We need a responsible principal reduction plan that will help keep people in their homes and keep neighborhood values up – it is good for homeowners, good for communities and good for our economy.”

“Our country faces a national foreclosure crisis,” the lawmakers also wrote in the letter. “The American people expect government officials, whether elected or part of the civil service, to solve the complex problems that our nation confronts. We therefore urge you to harness your agency’s powers, resources, and financial expertise to prevent more foreclosures and reduce negative equity.”

The letter sent today is part of ongoing efforts by California Democrats pressuring the FHFA to make the best decisions on behalf of homeowners. Most recently, the lawmakers wrote to President Obama asking for a recess appointment of a new FHFA director.