NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman published an op-ed in Politico on Wednesday calling on President Barack Obama to replace Edward DeMarco, the acting director of the Federal Housing Finance Agency.
The FHFA oversees mortgage institutions Freddie Mac and Fannie Mae. The op-ed, co-authored by Massachusetts Attorney General Martha Coakley, said that DeMarco's refusal to give struggling homeowners the relief they need acts as a roadblock to a full economic recovery and hurts families around the nation.
"Under DeMarco's leadership, Fannie Mae and Freddie Mac have refused to allow principal write-downs for underwater
mortgages," Schneiderman and Coakley said. "At a House Financial Services Committee hearing last week, DeMarco was questioned by Congress and confronted by protesters calling for mortgage principal reduction, but he again refused to change his position. This failed policy is a direct impediment to our economic recovery and stands in way of our efforts to provide much needed assistance to homeowners across the country."
Schneiderman and Coakley said it is in everyone's best interest for lenders to work with struggling homeowners to reduce debts and keep them in their homes.
"Underwater homeowners are more likely to wind up in foreclosure," Schneiderman and Coakley said. "Even if they avoid foreclosure, they are saving every penny to try to pay down their debt. They can't spend at local businesses. They can't move for a better job, or invest in starting a small business. They are trapped under America's $628 billion mountain of negative equity."
The attorneys general said DeMarco's refusal to cooperate is undercutting the National Mortgage Settlement in which 49 states settled with the five largest mortgage servicing banks to deliver billions in relief and mortgage principal reductions to homeowners.
"Contrary to the findings of his own agency, DeMarco argued that principal reductions would weaken the finances of FHFA and produce a financial loser for taxpayers," Schneiderman and Coakley said. "These are two separate questions, only one of which is DeMarco's responsibility. He is responsible for the fiscal health of his agency. FHFA estimated that it would come out ahead by $3.7 billion from the administration's plan because of the aid from treasury. It's likely that taxpayers as a whole will come out ahead as well."
Schneiderman and Coakley said that even if taxpayers don't come out ahead, the administration can use public resources to aid a policy that prevents foreclosures, creates jobs and simulates the economy. The attorneys general said it is not the place of an acting agency head like DeMarco to stand in the way of such a beneficial plan.