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Edward DeMarco, the acting director of the Federal Housing Finance Agency, on Tuesday defied both the Obama administration and widespread expectations that he would cave to a torrent of political pressure and allow Fannie Mae and Freddie Mac to offer principal reductions to troubled borrowers.
July 31 -
The regulator of Fannie Mae and Freddie Mac says it needs more time to draw a final conclusion on whether to pursue principal reductions.
April 27 -
Ed DeMarco, the regulator of Fannie Mae and Freddie Mac signaled Tuesday that the Federal Housing Finance Agency is unlikely to pursue a broad principal forgiveness program.
April 10 -
The Obama administration wants the agency to give more consideration of tool meant to help troubled borrowers keep their homes.
March 21 -
Edward DeMarco, the regulator in charge of supervising Fannie Mae and Freddie Mac, was once again in the hot seat as lawmakers pressed him on his reluctance to forgive underwater borrower's debt.
February 28
WASHINGTON — Senate Banking Committee Chairman Tim Johnson called on the Federal Housing Finance Agency to redo its analysis that essentially closed the door to principal reductions by Fannie Mae and Freddie Mac.
In a sharply worded letter to acting FHFA Director Edward DeMarco, the South Dakota Democrat said the agency should react to a Treasury Department memo that had put principal reductions in a more positive light.
"I request that you rerun your analysis to take into account the issues raised in the memo," Johnson wrote in the letter late Tuesday. "It is important that we look at all relevant analyses and facts presented to make the best decisions on how to help homeowners and protect taxpayers."
An FHFA spokeswoman said the agency "is in the process of responding to the chairman's letter." She declined to comment on whether FHFA will consider Johnson's request.
On Tuesday, DeMarco defied the Obama administration by announcing he would not allow Fannie and Freddie to offer principal reductions to troubled borrowers. The decision followed months of back and forth between the FHFA and the Treasury Department. Treasury Secretary Timothy Geithner had repeatedly urged DeMarco to reverse the FHFA's longstanding opposition to the government-sponsored enterprises' wiping out portions of mortgages belonging to underwater borrowers.
In his own letter to DeMarco Tuesday, Geithner said, "In view of the clear benefits that the use of principal reduction by the GSEs would have for homeowners, the housing market, and taxpayers, I urge you to reconsider this decision."
DeMarco said the agency's decision was based on analysis showing that strategic defaults by consumers in a principal-reduction program would increase losses to the GSEs. By proxy, that would mean losses to taxpayers, since the two mortgage giants are under federal conservatorship. Although the FHFA concluded principal reductions could save taxpayers between $100 million and $500 million, DeMarco said 3,000 to 19,000 defaults could erase those gains.
But in his letter, Johnson said the FHFA had not fully considered the findings of a July 31 memo by Michael Stegman, counselor for housing finance policy at Treasury. "In what areas do you disagree with the analysis provided in that memo?" wrote Johnson.
The senator also admonished DeMarco for releasing information to the media before it was disclosed in a letter to Johnson.
"I did not appreciate getting requests from the media to respond to a letter in their possession addressed to me that I had not received," said Johnson. "In the future, when you wish to correspond with me in writing, I ask for the courtesy of receiving the letter first."
