LETTER | AG Coakley Urges, Threatens to Sue FHFA to Use Buyback Programs and Principal Reductions to Keep People in Their Homes

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LETTER | AG Coakley Urges, Threatens to Sue FHFA to Use Buyback Programs and Principal Reductions to Keep People in Their Homes

LETTER | AG Coakley Urges, Threatens to Sue FHFA to Use Buyback Programs and Principal Reductions to Keep People in Their Homes

AG to Review All Legal Options if FHFA Does Not Comply With Massachusetts Law

BOSTON – Saying in a letter pdf format of FHFA Letter 051414 file size 2MB today that the use of buyback programs and principal reductions are “key to helping homeowners recover from this foreclosure crisis,” Attorney General Martha Coakley urged the new director of the Federal Housing Finance Agency (FHFA) to use buybacks or face legal action.

“We believe that buyback programs implemented by credible not-for-profit institutions, and loan modification programs that permit principal reductions for distressed borrowers, are key to helping homeowners recover from this foreclosure crisis and restoring a healthy economy,” AG Coakley said in the letter to Melvin Watt, the new director of FHFA.

AG Coakley states that her office is reviewing all legal options as the mortgage giants Fannie Mae and Freddie Mac, currently under FHFA conservatorship, refuse to comply with the August 2012 Massachusetts law An Act to Prevent Unnecessary and Unreasonable Foreclosures.

The groundbreaking law requires that creditors not prohibit sales to non-profits like Boston Community Capital’s “Stabilizing Urban Neighborhoods” program (SUN). Through this initiative, BCC purchases a home that is typically owned by a lending bank at its current market value and finances its immediate resale to the former homeowner. Fannie Mae and Freddie Mac have continued to block buybacks even though they lose money in the process.

In the case Suero v. Freddie Mac, SUN and the 2012 Massachusetts law were both referenced in the decision by the U.S District Court to issue a preliminary injunction pdf format of Court Order 10-30-13 which prevented the foreclosure and sale of the plaintiff’s home in Dorchester. The decision also referenced a February 2013 letter pdf format of FHFA Letter 02-11-13 the AG’s office sent to FHFA explaining that Massachusetts law now explicitly forbids banks from refusing to consider offers from legitimate buyback programs merely because the property will be resold to the former homeowner.

Because FHFA has refused to change its policy, AG Coakley sent a new letter to Director Watt, stating that the current FHFA policy of prohibiting such sales, even at fair market value, is in direct conflict with the Massachusetts law and represents an economic loss for taxpayer-owned Fannie and Freddie.

“To date, [Fannie Mae and Freddie Mac] have not complied with this provision, which has unfortunately impeded the ability of buyback programs to maximize the number of borrowers they can assist, which in turn has hindered the broader goals of neighborhood stabilization and revitalization,” AG Coakley said. “Our office is considering all available legal avenues, including litigation, to ensure compliance with Massachusetts law, should FHFA fail to promptly amend its policies to allow Fannie Mae and Freddie Mac to participate in credible buyback programs.”

Buyback programs such as the SUN Initiative adhere to strict and conservative underwriting standards. For example, SUN provides only 30 year fixed-rate mortgages and as a result, financing is only extended to homeowners who can truly afford to stay in their homes, preventing displacement and avoiding neighborhood blight.

The letter also continues the push for principal reductions. Since 2012, AG Coakley has  encouraged principal reduction  by Fannie and Freddie as a critical foreclosure prevention tool. In an April 2012  letter  to then-Acting FHFA Director Edward DeMarco, AG Coakley was joined by 10 other Attorneys General urging Fannie and Freddie to permit principal reduction in loan modifications. Despite a change in leadership, Fannie and Freddie continues to prohibit principal reduction as a means of keeping people in their homes.

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3 Responses to “LETTER | AG Coakley Urges, Threatens to Sue FHFA to Use Buyback Programs and Principal Reductions to Keep People in Their Homes”

  1. Charles Reed says:

    Are we in an alternate universe? FHFA are part of the problem and are the one having these properties foreclose to line their pockets! As the court are rejecting these filing for foreclosures because they cannot prove ownership!

  2. Sarah says:

    It sounded like Mel Watt (Bank of America) wanted to get rid of “strict and conservative underwriting standards” to support the housing market recovery, so more people can buy houses.

    Isn’t it ironic that a call for “strict standards” when people are facing the loss of their homes, but sometimes had the “loosest of standards” when the so-called contract was signed – somehow makes a buyback program more credible? Any one need to wonder why Fannie doesn’t want to let homeowners buy their houses back? They argue morals, which is deceitful, and a tradition when profit matters more than people.

  3. GuyFawkes says:

    I watched as Freddie and Fannie executives were talking before foreclosure mill attorneys talking about “timelines.” If any of you don’t know, it is precisely the quasi-governmental agencies that are pushing the foreclosures FASTER and providing the servicers with financial incentives to get the populace out of their homes.

    I, for one, do not understand why ALL OF US facing foreclosure aren’t at the Whitehouse gates with pitchforks and torches. WTF? When is THAT going to happen? How many Americans need to lose their homes? It is beyond me.

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