Government Bars Fannie-Freddie from Reducing Principal

Fannie Mae

WASHINGTON (AP) - A federal regulator is standing by its decision to bar Fannie Mae and Freddie Mac from reducing principal for borrowers at risk of foreclosure, resisting pressure from the Obama administration.

The Federal Housing Finance Agency announced the decision Tuesday after months of considering the option.

The agency's acting director, Edward DeMarco, has long opposed allowing Fannie and Freddie to offer principal reduction.

DeMarco said an extensive analysis by the FHFA found the potential benefit was too small compared with the costs and risks. The risks include as many as 19,000 borrowers strategically defaulting on their loans, according to the analysis.

About 1.4 million homeowners would be eligible for principal reductions from Fannie and Freddie.

The Obama administration immediately voiced its disappointment with the decision.

"I do not believe it is the best decision for the country," Treasury Secretary Timothy Geithner said in a letter to DeMarco.

Geithner said allowing Fannie and Freddie to do "targeted" reductions of principal for troubled borrowers would provide much-needed help to a significant number of troubled homeowners. He said that would help repair the nation's housing market and result in a net benefit to taxpayers.

The government rescued Fannie and Freddie in September 2008 to cover losses on soured mortgage loans. Since then the FHFA, which is independent of the administration, has controlled their financial decisions.

U.S. taxpayers have spent roughly $170 billion to rescue the companies. It could cost roughly $260 billion more to support them through 2014 after subtracting dividend payments, according to the government.

The Treasury Department said in January that it would cover part of the cost if Fannie and Freddie could reduce principal when they modify mortgages for troubled borrowers. The department said it would use unspent housing rescue money from the $700 billion Troubled Asset Relief Program, or TARP.

DeMarco acknowledged in a meeting with reporters that administration officials and others could disagree with the agency's decision and interpret its analysis differently.

"Others could look at this and weigh these things differently," he said.

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chris1011

Dearest Diary;
For Pete’s sake it was never meant to be like this.
I was meant to win on Romneycare but my own party sabotaged me.
I have the hair, the Grecian formula look with the deliberate distinguished white temples. The picture postcard family that looks anachronistically odd and associates with shady business people; but could pass as the virtuous looking version of the Osmond’s.
I’m a job creator damn it, a successful tycoon so why aren’t you all taking that on face value and bowing and scraping as I’m use to?
Why must you pry and pry until I’m too embarrassed to run on my planned lies and woefully flat singing.
It’s un-American of you all to expose my very shallow veneer of lies that I lovingly crafted over the decades for my vanity run for president damn it.
I even fired the best, cheap team of illegal-aliens I ever had working on my garden in one of my many blue state located homes, I hope they’re available next year? (Seriously, you wouldn’t expect me to live in a red state would you, they’re so backward and full of uncouth people).
Life’s so unfair and if I was born with emotions I’d be devastated at how short a time my cleverly crafted illusion took to crumble and vanish.
Who’d have thought journalists paid by my major backers would collude in telling the truth about me. I feel betrayed now on all sides.
I can’t even run on my term as governor because that’s full of landmines buried barely beneath the surface and if I place the toe of one of my Gucci loafers in that direction. Boom! Just like Wile. E. Coyote and Obama going meep! meep! As he speeds off!
It was never meant to be like this. I have the rugged good looks of a President of America in a made for TV Canadian movie.
I’ve turned off the entire African American, Latino and Center of America and most women especially when I followed it up by calling them freeloaders after free stuff on several occasions.
How come every insult and duplicity I make gets reported on? It’s like someone invented a machine that can record sound and even motion pictures.
Anyway I’m going to stay in denial and keep saying the irrefutable truth is a lie. Because I’m Mitt Romney, CEO, born into privilege and no upstart with integrity is going to besmirch my name. Especially with the truth!
Me 2012
Because it’s my turn.

August 03 2012 at 4:29 PM Report abuse -1 rate up rate down Reply
welcome mr jones

the person who said he'd vote for a chineese person if it bought our country back is full of bullshit,this country has been headed this way for over 25 yearsor more ,every economic advisors/forcaster has said it over and over again,you don't sneak up on a trillion dollars of debt.....our great white leaders had a lot to do with it while eating good at the big table....hope and change working just fine..

August 02 2012 at 4:38 PM Report abuse -1 rate up rate down Reply
gttdux

Fire the SOB now, Obama or face the consequences in November.

August 02 2012 at 12:54 PM Report abuse +1 rate up rate down Reply
jankantius

Of course he won't help out the homeowners. The more people go down the drain the greater the hopes for Republicans to blame Ibama.

August 01 2012 at 12:31 PM Report abuse -1 rate up rate down Reply
findrobin

Oh sure! I beleive that. Let's see...Obama puts one of his puppets as head of the FHFA (DeMarco) then that person goes against what the dictator...I mean preciuosdent ask him to do. Sure I beleive every bit of it.

August 01 2012 at 12:07 PM Report abuse +2 rate up rate down Reply
1 reply to findrobin's comment
itacurubi

DeMarco is a Bush-era holdover. He was not appointed by Obama. The recommended sequnce is to determine facts, then think, then right. You seem to have it exactly opposite.

August 03 2012 at 7:56 AM Report abuse rate up rate down Reply
VIP South Beach

Thats the American way the only free money goes to bail out the big banks and or course to all the bankers bonuses. The rich will always win becuase they have all the politicans in there pockets both Dems and Republicans are one in the same.

August 01 2012 at 9:37 AM Report abuse rate up rate down Reply
tomkociuba

The banks look more profitable when they decrease the principal instead of lowering the interest rate. Wall street loves profitability

August 01 2012 at 9:27 AM Report abuse rate up rate down Reply
weeziebathome

So, putting more houses into foreclosure is good for your neighborhood, town, state, country? On what planet?

August 01 2012 at 9:08 AM Report abuse rate up rate down Reply
1 reply to weeziebathome's comment
Matt

On planet USA, where a bunch of ignorant people signed mortgages they couldn't afford, issued from incompetent banks. If we allowed the banks to foreclose and fail, then we would have had people buying homes who could actually afford them, from banks who were issuing mortgages which could actually be repaid. This would have been very painful in the short term, but my daily readings wouldn't be littered with this nonsense nowadays. Now, because we simply masked the crisis, we have to deal with still-incompetent banks, and still-ignorant homeowners in homes they could never afford in the first place. We just keep delaying the inevitable: these people will be forced out of their homes, and these banks will fail again. You can fight the nature of the free market for a while, but nature always wins.

August 01 2012 at 2:06 PM Report abuse rate up rate down Reply
pdbliz

DEMOCRATE WAY,,,,,,,,,,,,,,,,,BUY VOTES WITH HAND OUT MONEY............

DEMOCRATE WAY,,,,,KEEP PEOPLE IN MODERN SLAVERY FOR VOTES,,,,WELFARE,,,SECTION 8,,,FOOD STAMPS...HAVE ALL THE CHILDREN YOU WANT,,,THE GOVERMENT WILL PAY.........FREE CELL PHONES....HELP ON WATER AND LIGHT BILL...
,,,,,,WHAT ABOUT,,,EACH PERSON MADE RESPONSIBLE FOR THEMSELVES.....
DEMOCRATES,,,,,YOU ARE A EMBARRASMENT TO AMERICA.!!!!!!!!!

August 01 2012 at 8:43 AM Report abuse +4 rate up rate down Reply
pdbliz

I am sick of giving out money.!!!!!!!!!!!!!!!!! If the post office does not have the money to bail out its own people,,,,,SORRY CHARLIE..!!!! Cut back on there benifits.....Cut back on employes,,,,,,,,cut,,back,,,cut back,!!!!
Cut back,,,,,,Cut back,!!!!!! All other companies do,,,but,,I FORGOT,,,IT IS A GOVERMENT RUN COMPANY..
THAT IS THE PROBLEM,,,,,,,,AND,,WAIT FOR HEALTH CARE,,,,,,,,,!!!!!!!!!!!!!

August 01 2012 at 8:40 AM Report abuse +4 rate up rate down Reply