Edward DeMarco, the acting head of the Federal Housing Finance Agency and de facto leader of the two GSEs has been steadfast in his opposition.
President Obama has made principal reduction priority one. It was one of the highlights of the mortgage settlement and many economists point to it as the way out of this housing mess.
But DeMarco still hasn’t budged, because he says principal reduction will cost the taxpayer money and isn’t good for Fannie and Freddie’s bottom line.
Except maybe it is.
According to NPR and ProPublica, executives at both Fannie Mae and Freddie Mac have concluded that principal reduction would prevent larger losses and in fact, save the two companies money.
Their report claims that in part because of new Obama incentives, which would reimburse lenders half of what they write off, that Fannie and Freddie would benefit from principal reduction
These presentations have yet to be made public, but Democrats are already clamoring to see them. And so am I.
Look I’m not saying that principal reduction comes without risk. Could everyone decide to stop paying their mortgages in order to get a write-down? Sure.
But just because you might get hit by a car doesn’t mean you don’t cross the street. The housing market will NEVER rebound if people keep getting kicked to the curb.
And I don’t care what Edward DeMarco has said, the bottom line shouldn’t be his bottom line. It shouldn’t be about what is cost effective, it should be about what keeps borrowers in their homes. Last time I checked, they are taxpayers too.