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FHFA needs a true housing advocate at the helm - and it's not Ed DeMarco.
NYC Needs Fannie and Freddie to Work for all New Yorkers
The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac are critical to the housing market and economy in NYC. Together they hold more than half the mortgages in the country, which translates into roughly 300,000 mortgages in NYC alone, including about 3,000 multifamily buildings in the Bronx, Brooklyn, Manhattan and Queens, which house hundreds of thousands of New Yorkers. With the start of a new presidential term and the economy still struggling, President Obama has the opportunity to act on behalf of the millions of homeowners in or at risk of foreclosure, and the communities impacted by this crisis. He can do this by moving quickly in his first 100 days to replace Ed DeMarco, Interim Director of the Federal Housing Finance Agency (FHFA), with a true advocate for affordable housing who can balance housing needs with our economic interests. The FHFA oversees these two entities and is thus critical to their ability to carry out their missions. Fannie Mae and Freddie Mac serve to increase access to mortgage credit and to stabilize the nation's residential mortgage markets in order to expand opportunities for homeownership and affordable rental housing. But Ed DeMarco is impeding those missions. Instead of enabling families to remain in their homes, DeMarco's actions are driving millions of homeowners into unnecessary debt and foreclosure. As a result, our economy and millions of homeowners continue to suffer.
Specifically, DeMarco is blocking principal reduction for homeowners facing foreclosure. He does so despite the housing agencies saying it would be good for taxpayers and homeowners, and despite a very generous offer of federal subsidy to offset the potential costs to those agencies, which have already benefited from $140 billion in federal bailout money that they have yet to fully repay. He also proposes raising the price of mortgage guarantee fees in states where companies claim they lose money because the foreclosure process is slower. In reality such fees penalize states like NY that have strong foreclosure laws that require advanced notice to homeowners and settlement conferences with lenders that have markedly increased settlement rates and reduced foreclosures. Any delays in the process are caused by servicers dragging their feet or not complying with the law. While most of the private banks, insurers, and automakers have paid back their bailout funds, Fannie and Freddie have not.
The FHFA has a plan for them to finally pay down their debt, but that will take a long time and hinges upon the GSE's eventually winding down. They currently fill a vital space in providing much-needed liquidity to the mortgage market, especially for multifamily rent regulated housing, which is one of the largest sources of private affordable housing in the city. Any plan for their future must not lead to a system that will increase the price of housing for working-class Americans. More than 11 million homeowners are underwater nationwide, struggling in a recession they did not cause and paying more than what their homes are worth. Resetting mortgages to fair market value is good for them, and good for the economy. Principal reduction will help people stay in their homes, stabilize neighborhoods, and create jobs.