Edward DeMarco Continues to Resist Mortgage Write-Downs

by 02 Aug 2012

(TheNicheReport) -- The Obama administration supports the idea of forgiving the excessive principal amounts owed by many American mortgage borrowers, but the head of the Federal Housing Finance Agency (FHFA) vehemently disagrees. Edward DeMarco, the acting director of the FHFA, does not believe that President Obama's plan to use taxpayer funds to help homeowners avoid default and foreclosure is a good idea. Mr. DeMarco is also in charge of overseeing the operations and financial health of Fannie Mae and Freddie Mac, the mortgage investing giants that were bailed out by taxpayer funds after the peak of the global financial crisis in 2008.

This is not the first time that Mr. DeMarco has expressed doubt about mortgage forgiveness programs. When the top five mortgage lenders in the United States executed a settlement agreement with several attorney generals over dubious foreclosure practices, they agreed to offer mortgage write-downs to underwater borrowers. These are homeowners who owe significantly more on their mortgages than what their properties are actually worth.

Mr. DeMarco's Rationale

Between Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA), more than sixty percent of all mortgage loans in the United States are guaranteed against default by the government. Under the mortgage forgiveness proposal by the Obama administration, taxpayer funds would be used to write down principal amounts on underwater mortgages with the intent of making them equitable and giving borrowers a break. This principal reduction plan is the latest in a string of programs that the current administration has implemented to stabilize the housing market.

Ever since being confirmed acting director at the FHFA, Mr. DeMarco has been pressured to keep Fannie and Freddie in reasonable financial health. He believes that principal reductions would actually be too risky and expensive for the government-sponsored entities, and in the end for the American taxpayers. Mr. DeMarco also believes that there are sufficient programs in place to assist borrowers.

Opposition to Mr. DeMarco

Some lawmakers and even Treasury Secretary Timothy Geithner are not in agreement with Mr. DeMarco's assessment of mortgage write-downs. Mr. Geithner has looked at figures provided by Mr. DeMarco, and in his opinion the benefit to taxpayers on principal reductions would be about $1 billion. Mr. DeMarco insists that the benefit would actually be $500 million, but only as a result of a best-case scenario. The funds for these write-downs would come from the Troubled Asset Relief Program (TARP) fund, which is currently at about $700 billion.

An opinion piece on the Wall Street Journal published on August 1st pondered if the Executive branch could actually remove Mr. DeMarco from his position at the FHFA. The conclusion was that it would be a risky political move.


  • by being human | 8/3/2012 1:51:34 PM

    This is silly. All DeMarco has to do is attach the title policy. The write down could be performed. but when the home sells. the lender would receive any amount over the sales price up to the total amount owed. This would give the borrower a home to live in. The tax payers would receive monthly payments and when the market turns around. Everyone involved is made Whole. These people need to start thinking outside of the box. Until they do, the market will never improve. I'm surprised Geithner hasn't told them to do this.

  • by Get Real | 8/3/2012 9:15:45 PM

    Get REAL people. most of these borrowers purchased their homes with stated income mortgages where they lied about their real income. No one forced them to make a purchase that they could not afford. Others refinanced their homes with these same "liars" mortgages and took all the equity out of their home in cash. some striped the equity from their homes multiple times and believe it or not some took more cash from their ATM home than they actually paid for the house in the first place. And now they want someone to forgive them for their actions!

    And to top that off our LIBERAL politicians what to make those of us who are RESPONSIBLE bail these IRRESPONSIBLE people out from the situation they caused themselves! Now let's see.... if we bailed out every irresponsible upside down home owner to the amount of only $100,000 ( and a lot of them are over $200,000 upside down), shouldn't the taxpayers also reward the responsible homeowners with an equal $100,000 gift?

    Buying a home is NOT a guaranteed investment that will appriciate. It is no different than purchasing stocks, bonds, or any other investment. They may go up in value or they may go down in value. And housing has done just exactly that multiple times over the past 64 years of my life. You pay your money and you take your chances.

    I often wonder about these homeowners who are just walking away from their homes and screwing the lender out of the money thay owe to them. What if they borrowered the money to by their home from their parents or grandparents? Would they walk away and screw them also? Unfortunatley with todays entitlement attitude I think the answer is...yes they would. These borrower/homeowners borrowed the money to purchase or refinace their homes in good faith and PROMISED to repay the money to the lender. They owe the money and that is all there is to it. If they walk away just because they are underwater and don't want to repay the money and have the income to continue making payments, then they should NOT be forgiven their debt and should have their credit severly dammaged and required to repay the debt, or file bankruptcy.

    Again I repeat.... no one held a gun to the heads of these borrowers and no one forced them to make the purchase. As long as the government continues to bail these loosers out and absolve them of their responsibility we will only make the situation worse and prolong the housing melt-down. The only reason the democrats and our liberal politicians want to bail these people out is because of the political clout it will give them for re-election.


Should CFPB have more supervision over credit agencies?