Representative Mel Watt, Democrat Representative from North Carolina was named to replace Ed DeMarco on May 1st as the head of the Federal Housing Finance Agency (FHFA) after a year of protests from housing activists.
Massachusetts Attorney General Martha Coakley called Demarco’s actions “inexplicable” and joined New York’s Attorney General Eric Schneiderman in a letter calling for DeMarco’s ouster.
According to Coakley, “Mr. DeMarco was missing a huge opportunity to help struggling borrowers with his obstinate resistance to make a change that would help stabilize the economy.”
“President Obama dumping DeMarco is a real victory for homeowners,” says Oakland Home Defender Bill Chorneau.
“DeMarco, appointed by George Bush refused to allow banks to offer principal reductions for homeowners with Fannie Mae and Freddie Mac loans.
“These federal government loans constitute nine out of every 10 loans in our country, and folks were losing their homes left and right because they couldn’t effectively modify their note so that it was affordable. Principal reduction is only fair and makes homes affordable.”
DeMarco called principal write-downs a “free lunch” that would discourage homeowners from paying their mortgage.
“We’ve been in a situation where the big banks were making principal reductions while Fannie Mae, owned by the federal government was making principal reductions. Fannie Mae just offered me a loan modification that I can pay off by the time I’m 103 if I have $120,000 to make the balloon payment,” said Chorneau.
Principal reductions were part of the National Mortgage Settlement, and banks pledged to write off $10 billion in outstanding principal. However, fewer than 50,000 borrowers have received principal reductions.
State officials have evidence that loan write-downs are effective in keeping people in their homes and that it does not lead to intentional defaults as opponent DeMarco claimed.
Mel Watt, first elected to the House of Representatives in 1992, served on the chamber’s financial services committee and is known for trying to stamp out predatory lending and gaining home loans for low-income borrowers and those with spotty credit.
In spite of agreeing to the National Mortgage Settlement, Wells Fargo and Bank of America are being sued by New York State’s top prosecutor Attorney General Eric T. Schneiderman claiming the banks have violated the terms of the $26 billion mortgage settlement.
Schneiderman prepared the lawsuit against both banks on May 6 for “repeatedly violating” the terms of the National Mortgage Settlement, a pact between the nation’s largest banks and attorney generals in 49 states over foreclosure abuses.