NEW YORK—State Attorneys General (AG) are urging president Barack Obama to replace Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA.) In a letter dated March 13, nine AGs request that a new, permanent director be appointed to replace DeMarco.
According to the letter, under DeMarco’s leadership, FHFA has become an obstacle to ongoing mortgage relief to distressed homeowners. In particular, FHFA has refused to adopt policies that would allow for principal forgiveness and forbearance.
The FHFA holds to the “position that principal forgiveness conflicts with its goal of asset preservation.” The AGs write that such a policy achieves the opposite results.
“The FHFA’s current policy actually reduces the value of its holdings portfolio,” the letter states. “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.”
The AGs go on to suggest that the FHFA policies are a direct impediment to the U.S. economic recovery. Its policies, according to the letter, are forcing more foreclosures and devaluing properties by forcing distressed loans to default.
“We have worked tirelessly, along with our federal, state, and local partners to develop a multi-pronged approach to dealing with the foreclosure crisis. Fannie Mae and Freddie Mac should be among our partners in this effort, and leaders in the arena of loan modification best practices. Instead, they have been an obstruction. We believe that until new, permanent leadership is named to FHFA, they will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis,” the letter states.
The attorneys general are led by Massachusetts AG Martha Coakley. New York AG Eric T. Schneiderman is a co-signer. Schneiderman led the negotiation last year between 49 attorneys general and five of the largest mortgage servicers in the nation to address widespread loan malpractices. Loan modifications that the FHFA is obstructing could be a key tool for the five mortgage servicers as they come to settle their commitments under the National Mortgage Settlement. New York borrowers have received more than $1.8 billion in mortgage relief as part of the settlement to date, according to a press release from Schneiderman’s office.