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FOR IMMEDIATE RELEASE
Contact:
Joseph Rendeiro
(202) 776-1566
jrendeiro@nclr.org
Washington, D.C.—Earlier today, Acting Director of the Federal Housing Finance Agency (FHFA) Edward DeMarco announced that he will not allow Fannie Mae and Freddie Mac to use targeted principal reductions in their loan modification programs for borrowers at risk of foreclosure. NCLR (National Council of La Raza) is deeply disappointed in this decision and firmly stands with Treasury Secretary Timothy Geithner as he asks the FHFA to reconsider the use of principal reduction, which has clear benefits for struggling homeowners, the housing market, and taxpayers.
“Principal reduction is proven to be one of the most effective methods of helping underwater families keep their homes,” said Janis Bowdler, Director of the Wealth Building Policy Project at NCLR. “It is astonishing to think that DeMarco would continue to reject an evidence-based method for avoiding foreclosures, especially when their own analysis points to the very clear benefits that principal reduction could have for our housing market. With millions of people on the brink of losing their most important asset, Fannie Mae and Freddie Mac should be making use of available tools to reduce losses for families, neighborhoods, and investors—targeted principal reductions can achieve this goal.”
In fact, as Sec. Geithner pointed out today in a letter to the acting director, the FHFA’s analysis of principal reduction shows that allowing Fannie Mae and Freddie Mac to participate in their principal reduction program would potentially help up to half a million homeowners, save Fannie Mae and Freddie Mac up to $3.6 billion, and save taxpayers a net $1 billion.
“Thankfully, Sec. Geithner has stepped in to champion principal reduction, showing homeowners that they do have allies in Washington who are willing to take the necessary steps to navigate this country out of the housing crisis,” added Bowdler. “Last year we delivered 10,000 postcards from concerned individuals asking for this kind of leadership from the Treasury. We applaud Sec. Geithner for his commitment to assuring that the housing market recovers and that struggling families across this country can keep their homes.”
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