Off with his head! On with forgiveness

Hey!
Shut up.
Don't lie to me.
You think I'm blind but I have eyes to see

 – Bonnie Raitt, “Have a Heart”

I love Massachusetts Attorney General Martha Coakley because those lyrics sum up essentially what she said in a letter to the head of the Federal Housing Finance Agency (FHFA), Acting Director Edward J. DeMarco.

Bear in mind, the FHFA is a government agency that oversees Freddie Mac and Fannie Mae, the monster lending institutions that own more than half of the mortgages in the U.S.

Massachusetts recently passed a law that requires creditors like Freddie Mac to take commercially reasonable steps to avoid foreclosure on certain mortgage loans. Recently, the FHFA officially refused to practice principal forgiveness.

Principal forgiveness is an option Freddie Mac has to modify a loan in order to bring the monthly payment of someone in financial distress down to 31 percent of the person’s monthly income. It means Freddie Mac and Fannie Mae have to give up, or forgive, some of the principal amount of the loan.

“We expect that Fannie Mae and Freddie Mac will pursue common-sense loan modifications for borrowers when the economic benefits of a modified loan exceed the significant losses anticipated at foreclosure. These loan modifications are critical to assisting distressed homeowners, avoiding unnecessary foreclosures, and restoring a healthy economy in our Commonwealth,” Coakley said in her letter.

You go girl!

The FHFA is supposed to be on our side.

Yet this bozo currently in charge of the FHFA, Ed DeMarco, is repeatedly punishing homeowners who are legitimately in financial distress. He refuses to help, despite the fact that the White House, Congressmen, Senators, and the Treasury Secretary have all called for principal forgiveness and chastised DeMarco for his position.

Richard Zombeck, founder of the Home Preservation Network, posted a collection of quotes on the Huffington Post regarding Ding-Dong DeMarco.

Rep. Gary Peters of Michigan: “By refusing to implement a principal reduction program, FHFA is turning its back on hundreds of thousands of underwater homeowners and costing taxpayers billions of dollars. Principal reduction would not only help struggling families stay in their homes, it would also stabilize housing markets and bring much needed relief to communities that have been hit the hardest by the housing crisis.”

Rep. Barney Frank of Massachusetts: “He's acting as if he was head of two private companies called Fannie and Freddie and not taking into account the impact this has on the economy, and I think he should be more cooperative with efforts to reduce foreclosures.”

Here’s how Dunderhead DeMarco responded to suggestions that Freddie Mac and Fannie Mae offer Principal Reduction Alternatives (PRA): “FHFA has concluded that the anticipated benefits do not outweigh the costs and risks. FHFA concluded that PRA did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.”

Oh really, Scrooge-McDuck DeMarco?

How about this, from a study done by your own agency, the FHFA?

The study concluded that “Principal reduction leads to a 20 percent reduction in re-default probabilities as compared to a loan modification utilizing forbearance (see Excessive Forbearance in Jerky Jargon).

Principal reduction leads to a 24 percent reduction in re-default probabilities as compared to a modification that receives payment reduction, but neither forgiveness nor forbearance.”

And yet Delusions-of-Grandeur DeMarco still refused to allow principal reduction alternatives as a way to help homeowners avoid foreclosure and stay in their homes.

Enter Treasury Secretary Timothy Geithner, who sent DeMarco a stern, eight-page letter telling him to shape up. In it, he said, “Allowing principal reduction would ultimately save taxpayers as much as $1 billion.”

He went on to say, “As we have discussed many times, the use of targeted principal reduction by the GSEs would provide much needed help to a significant number of troubled homeowners, help repair the nation's housing market, and result in a net benefit to taxpayers.”

Geithner ended his letter to DeMarco with this: “Five years into the housing crisis, millions of homeowners are still struggling to stay in their homes, and the legacy of the crisis continues to weigh on the market. You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis. I hope you will move to address these problems with a sense of urgency and force commensurate with the scale of the remaining challenges.”

Okay, here’s my big question: If the President, House of Representatives, Senate, and the Treasury Secretary ALL think DeMarco is behaving badly, WHY CAN’T THEY STOP HIM?

My hero, Paul Krugman of the New York Times says that DeMarco should be fired. In an opinion piece he wrote at the end of July, he wrote:

“If the Secretary of the Treasury, acting on behalf of the president, believes that it is in the national interest to spend some taxpayer funds on debt relief, in a way that actually improves the FHFA’s budget position, the agency’s director (DeMarco) has no business deciding on his own that he prefers not to act.
"I don’t know what DeMarco’s specific legal mandate is. But there is simply no way that it makes sense for an agency director to use his position to block implementation of the president’s economic policy, not because it would hurt his agency’s operations, but simply because he disagrees with that policy.
This guy needs to go.”

In conclusion, I'd like to sing in my best,nasally, gravelly, Bob Dylan voice:

"Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'."