Mr. President, Dump Edward Demarco

 Editorial, Opinion  No Responses »
Nov 072012
 

Why Barack Obama didn’t get rid of Edward DeMarco when the guy went rogue remains a bit of a puzzle. The acting director of the agency that oversees Fannie Mae and Freddie Mac is a Bush administration hold-over who got the job when Bush’s actual director resigned.

Under DeMarco’s tenure as temporary head of the Federal Housing Finance Administration (FHFA), he has stubbornly defied Obama administration policy requiring banks to negotiate loan modifications with families facing foreclosure on their underwater mortgages. DeMarco has refused to let Fannie Mae and Freddie Mac, both government-supported, cut original mortgage amounts to reduce monthly payments.

Illustration: npa-us.org

DeMarco ignored pressure, including a letter from Treasury Secretary Timothy Geithner and questioning from members of Congress who include the committees that oversee FHFA, to let Fannie Mae and Freddie Mac use principal reduction to help families keep their homes.

DeMarco’s own agency found that Housing Affordable Modification Program principal reduction alone could help some 500,000 homeowners and save Fannie Mae and Freddie Mac about $3.6 billion over standard loan modifications.

But DeMarco refused. And in September, he published a 31-page, four-year strategic plan for the Federal Housing Finance Administration.

In refusing to let the two entities use principal reduction, DeMarco in effect put banks before people. His strategic plan aims to make Fannie Mae and Freddie Mac financially healthy, preserve their assets, and protect investors in those assets.

Their assets basically consist of mostly bundled mortgages they buy from the banks that write them and from the bigger banks that bundle them. In exchange, they issue mortgage-backed securities (MBSs) to pay holders the payments and interest from the mortgages. Fannie Mae and Freddie Mac pay the banks to service the loans that back the MBSs. Banks and investors also trade MBSs.

Because Fannie Mae and Freddie Mac charge the banks small guarantee fees, they may have to  buy back defaulted loans at full value. So the banks that brought down the economy have no incentive to negotiate agreements that let homeowners pay less and stay in their homes.

The banks fare better if they foreclose mortgages, get all their money back, and leave houses empty. Homeowners who were trying to get banks to renegotiate their loans have suddenly found themselves dealing with Fannie Mae instead.

President Obama can get rid of DeMarco, but not by firing him outright. Since DeMarco is just an acting agency director, Obama can replace him with a permanent director. The appointment requires Senate confirmation, and in party-line decisions, the Democrats have too small a margin to ensure it would go through.

There’s another way: a recess appointment. Obama has used this tactic before. It’s time to force him to use it again to dump DeMarco.

–Janet Braunstein

11/17/2002: Corrected to show 500,000 homeowners instead of 500 million homeowners in fourth paragraph.

 

 

 

 

 

 

 

 

 

Jennifer Britt anti-eviction update

 News  No Responses »
Aug 242012
 

Taxpayer-owned mortgage institution Fannie Mae agreed Friday to continue negotiating with Jennifer Britt, who is fighting her family’s eviction from their foreclosed home, according to Steve Babson of People Before Banks.

Britt has been struggling to save her home since her husband’s death six years ago.

On Aug. 14, Fannie Mae offered to let Britt lease the house for two years at $785 a month, less than half of what Britt paid before the foreclosure. At the end of the proposed lease, Britt and her family would have to move out of the house, and Fannie Mae would sell it.

On Tuesday, Aug. 21, Britt responded with a counter-offer that would allow her to eventually own the house. Her attorney provided no details.

And on Friday, Aug. 24, Fannie Mae told Britt’s attorney that it will continue to negotiate on her counter-offer. It will conduct a formal walk-through appraisal of the property, according to Babson. The formal appraisal might be a tiny step toward shaping settlement terms that would let her keep the house after the lease.

Britt’s battle was originally with Flagstar Bank, which foreclosed on the house in 2010. When Fannie Mae bought the mortgage from Flagstar, Flagstar recovered most of its money. Fannie Mae refused to negotiate seriously with Britt’s supporters, including the Southwest Housing Solutions non-profit. Southwest Solutions offered to buy the house back from Fannie Mae for its market value: $10,000.

Fannie Mae wanted $100,000; Britt and her late husband had already invested that much. Britt had spent her life savings trying to satisfy Flagstar. Fannie Mae sought and won an eviction order against her in July 2012.

Britt’s many supporters mounted a high-visibility eviction defense. On July 19, neighbors and community activists began a determined vigil on her lawn and street to block any attempt at removing Britt, her family, or her possessions.

After more than three weeks, Fannie Mae bent under the pressure and sent Britt an offer. She remains protected by a coalition of activist and community groups.

–Janet Braunstein

For more on the Jennifer Britt vigil, see Terry Hall’s journal of the weeks leading up to Fannie Mae’s first offer.