The question of the government-sponsored enterprises' future has yet to become a front-and-center campaign issue. It should.
Former Republican presidential hopeful Jon Huntsman made dismantling the Fannie Mae/Freddie Mac duopoly part of his campaign platform. GOP front-runner Mitt Romney has stayed strangely silent on the issue, despite reports that his campaign has taken money from a former Fannie lobbyist. President Obama and his team have lobbed softballs with calls for principal reductions bouncing off the thick skin of the GSEs' enabler-in-chief, Federal Housing Finance Agency acting director Ed DeMarco.
Now, interestingly, the International Monetary Fund has weighed in, with its managing director Christine Lagarde telling an audience at the Brookings Institution that dealing with the U.S. housing crisis was a "matter of urgency," and calling for the "big boys and girls, Fannie and Freddie" to be part of the solution.
Yes, indeed: time for the kids to start acting like adults – and stop behaving like Fannie has in the case of Louise Davidson, the subject of my last two BankThink posts.
Louise, evicted by Fannie April 4, remains locked out of her house. I've tried to get answers about what could be done to resolve the situation, but continued questioning of Fannie Mae spokespeople was akin, as my late grandmother used to say, to banging my head against the wall.
However, the Federal Housing Finance Agency, Fannie's conservator, did weigh in with this comment: "We understand that Fannie Mae made substantial efforts to assist Ms. Davidson with a loan modification and, when that didn’t work, with additional financial assistance to help her vacate the property."
The boilerplate response about "substantial efforts" strains credulity. If there had been the will, they certainly would have found a way. There was no real inclination to resolve the situation after Bank of America, the servicer, turfed responsibility for halting an eviction to Fannie, which refused despite the fact that Davidson had found new employment that put her back into the "can pay" category.
Regarding the "assistance" cited by the FHFA , Davidson asks how "having a work crew put all my belongings in trash bags and dumping them on the street" can be considered "helping me vacate the property."
Whenever anyone criticizes the way Fannie conducts business, the response is invariably the same: retreating to the fortress, raising the drawbridge, and sending out legions of "home economists" armed with pie charts and scads of supportive statistics.
Enter Jorge Newbery, a competitive bicyclist and ultra-marathoner. In 2008 he had a unique idea. Create an organization, American Homeowner Preservation, to keep financially distressed families in place by getting lenders to agree to a short sale, then leasing back the house to the homeowner with deeply discounted monthly payments. Families would preserve equity in their homes while rebuilding their lives, without the dislocation of an eviction. Within a few years, the tenant can buy the home back at a discounted price, or AHP will sell it off, sharing any profits with the family.
It worked for some 200 families, but fell short of Jorge's goals, owing to resistance on the part of major banks, servicers, and the GSEs– Fannie included – that didn't countenance to the notion of keeping families in a house undergoing a short sale.
But Jorge is relentless, probably steeled in part by his athletic competitiveness, and has continued to press the case for AHP's vision, and, along the way his work has caught the attention of major bloggers like Arianna Huffington, Felix Salmon and Martin Andelman.
Jorge got a call from Louise shortly before her eviction. AHP over the years had evolved into a sort of socially conscious hedge fund, and by late 2011 started to acquire pools of nonperforming loans. It now focuses on helping these borrowers and other homeowners who are referred by their lenders. The drawback of this new focus is that it limits the universe of borrowers who receive help.
But there was something about Louise's case and her treatment by Fannie that got him going.
He started a petition on change.org (that’s how the case caught my attention), and sent word to Fannie that he'll make Louise the exception to AHP's new policy and buy her house as quickly as the papers can be drawn up. To date, there's been no response.
Hopefully, with a bit of press exposure, good will and common sense will prevail. If not, Louise's empty house may enter into the netherworld of Fannie-created programs like HomePath, an initiative that paints lipstick on the foreclosed pig in hopes it'll sell quicker. Go to YouTube to check out the cheesy attempt at a marketing video, derivative of the successful HGTV series "House Hunters," replete with an upbeat real estate agent escorting a bouncy young couple with requisite tots in tow through a HomePath foreclosure. Ooohs and Aaahs are nonstop. What a bargain, they're led to believe, and, as the agent exuberantly proclaims, "only 3% down." (Shades of Countrywide.)
HomePath is a registered trademark, which gives one pause for thought. Does Fannie fear that competitors are lurking in the shadows, waiting to expropriate this initiative for their own ends?
Yes they are, and for good ends. AHP and similar programs, like Boston Community Capital, are waiting in the wings, hoping to demonstrate that they have better ideas to ameliorating the foreclosure disaster.
Joel Sucher, a filmmaker with Pacific Street Films in Hastings-on-Hudson, N.Y., is working on "Foreclosure Diaries," a documentary about the financial crisis.