FHFA Releases Statement on the Use of Principal Forgiveness by Fannie, Freddie

Aug 1 - The Federal Housing Finance Agency has released the following statement by Edward J. DeMarco, acting director, on the use of principal forgiveness by Fannie Mae and Freddie Mac.

"Today, I provided a response to numerous congressional inquiries as to whether the Federal Housing Finance Agency would direct Fannie Mae and Freddie Mac to implement the Home Affordable Modification Program Principal Reduction Alternative. After extensive analysis of the revised HAMP PRA, including the determination by the Treasury Department to begin using Troubled Asset Relief Program monies to make incentive payments to Fannie Mae and Freddie Mac, FHFA has concluded that the anticipated benefits do not outweigh the costs and risks. Given our multiple responsibilities to conserve the assets of Fannie Mae and Freddie Mac, maximize assistance to homeowners to avoid foreclosures, and minimize the expense of such assistance to taxpayers, FHFA concluded that HAMP PRA did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.

"I have also previewed for Congress several housing-related initiatives to strengthen the loss mitigation and borrower assistance efforts of Fannie Mae and Freddie Mac as well as improve the operation of the housing finance market. These initiatives include new and consistent policies for lender representations and warranties, alignment and simplification of the Enterprise short sales programs, and further enhancements for borrowers looking to refinance their mortgages."