In remarks at a housing conference in Maryland today, U.S. Treasury Under Secretary for Domestic Finance Mary Miller told the audience that Treasury is working with the Federal Housing Finance Authority (FHFA) "to explore better ways to manage the resolution and disposition of the GSE's [government sponsored entities -- Fannie Mae and Freddie Mac) book of non-performing loans."

Miller pointed to the example of the Treasury's 'Hardest Hit Fund', under which states are able to purchase non-performing loans from private lenders and then passing the loans along to so-called "special servicers" for collection. Treasury wants to expand the program to include loans made or guaranteed by Fannie and Freddie by "shifting the risk and servicing responsibilities to special servicers, who have expertise in loan workouts, [and which] could give such servicers more flexibility to determine modifications or find faster resolutions for troubled borrowers."

The plan might work, if Treasury can get it past the acting chief of the FHFA, Edward DeMarco, who has proven to be a thorn in the Obama administration's side. He has refused to allow Fannie or Freddie to participate in loan modification program that would have required the agencies to write down loans as a way to help homeowners avoid foreclosures.

The Treasury was offering $0.63 on the dollar, but DeMarco wasn't buying. Because the loans that Treasury wants to dump this time around would also have to take some write-down, there's little reason to think that DeMarco will change his mind.

Paul Ausick


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