The acting director of the Federal Housing Finance Agency and overseer of Fannie Mae and Freddie Mac, Mr. DeMarco is a soft-spoken, career public servant — and under fire. In the thankless job of conservator for the loss-ridden mortgage finance giants, he has a duty to ensure that the companies operate in the best interests of the taxpayers who own them. That means working to keep a lid on the companies’ losses, which now total $183 billion.
But in recent weeks, Mr. DeMarco has come under increasing pressure to chuck his obligation to taxpayers and make Fannie and Freddie write down principal on mortgages held by troubled borrowers. He says, with reason, that such a program would run counter to his legal obligation to pursue only those activities that pose the least cost to taxpayers.
Via Josh Rosner – “Zandi had ZERO evidence and I do not believe FNM/FRE have conclusively found what this story states they have found“
NPR-
The two most powerful entities in the housing market — Fannie Mae and Freddie Mac — could be on the verge of a significant change regarding foreclosures. NPR and ProPublica have learned that both firms have concluded that giving homeowners a big break on their mortgages would make good financial sense in many cases.
In these so-called principal write-downs, a portion of the loan is forgiven for someone who’s having trouble paying. Many Democrats are pushing for this change. Most Republicans are against it. So far, a key federal regulator is blocking Fannie and Freddie from adopting the approach.
In recent days, financial executives at Fannie and Freddie have made presentations to their regulator saying that principal reduction for many homeowners would prevent larger losses and keep people in their homes.
This is a big development in a charged political issue. Some economists and many Democratic lawmakers see principal reduction as a powerful tool for helping the housing market.
Bank of America said Friday it would reduce by about $100,000 the amount owed by as many as 200,000 underwater homeowners as part of the recently announced government foreclosure settlement with top mortgage servicers.
BofA made the commitment as part of a $1-billion side deal to the $25-billion foreclosure settlement, said bank spokesman Richard Simon.
The principal reductions could eliminate the entire underwater portion of some mortgages that the bank services, with the average reduction expected to be more than $100,000, he said.
By cutting the amount owed on the mortgages, Bank of America could reduce the $3.25 billion in penalties it faces from the foreclosure settlement by $850 million. The details of the principal-reduction agreement were first reported by the Wall Street Journal.
I posted the quoted text below back on Nov ’10… I wonder who exactly signs off for MERS, if this is so?
The standard modification agreement is between the Borrower and the Lender. The agreement amends and supplements (1) the Mortgage, Deed of Trust or Deed to Secure Debt (Security Instrument) and (2) the Note bearing the same date as, and secured by, the Security Instrument. Prior to MERS, the standard agreement worked because the Lender was the mortgagee of record and could modify the mortgage and also had the authority to modify the Note.
The Obama Administration Friday announced it is expanding its flagship mortgage modification program and will now encourage lenders to reduce the principal loan balance for Fannie Mae and Freddie Mac loans.
The announcement comes just three days after President Obama said he would do more to support the struggling housing market and two days after Federal Reserve Chairman Ben Bernanke said housing is holding back the economic recovery.
Assistant Secretary for Financial Stability Timothy Massad in a blog post Friday outlined the changes to HAMP — including extending the end-date by one year and refocusing on principal reductions.
Massad said Treasury notified the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, that they will pay principal reduction incentives to the GSEs if they allow servicers to forgive principal — if done in conjunction with a HAMP modification.
Massad also said Treasury will triple the incentives for HAMP principal reduction modifications by paying from 18 to 63 cents on the dollar, depending on how much the loan-to-value ratio is reduced.
Seek the advice of a knowledgeable attorney before executing any *new* terms on a contract
Make sure they really own it
FELIX SALMON–
The holy grail of mortgage modification is principal reduction — the only thing which gets homeowners out of negative equity hell. And one of the big questions is why it’s not more common: it seems to make sense for all concerned, given that a sensibly modified mortgage is likely to be much more profitable for a bank than forcing a homeowner into a short sale or foreclosure and trying to sell off the home in the current market.
Last week the NYT, in a front-page story, found that Chase is actually doing principal reductions — quietly, on some of the most toxic mortgages written during the subprime bubble. But the mechanism was very mysterious — for one thing, the principal reductions were being done on many mortgages which were actually current and in good standing, rather than on mortgages which were careening towards foreclosure.
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