Housing regulator scolds lawmakers over principal reductions letter

“Throughout FHFA’s communications with you and the committee, we have focused on getting to the facts and the supporting information and analytics in what is a most important matter for homeowners and taxpayers.”

As part of the response, FHFA released an April 12 letter, which DeMarco said contained information requested by the lawmakers, as well as summaries of principal forgiveness pilot programs.

Cummings, ranking member on the House Oversight and Government Reform Committee, and Tierney, a panel member, wrote DeMarco asking him why he hadn’t told lawmakers about a proposed pilot program that would have provided, with an assist from Citibank, homeowners who are underwater on their mortgages and current on their payments with mortgage principal reductions. 

The lawmakers said they had received documents from an independent source that brought into question whether DeMarco had withheld some information from Congress. 

The exchanges comes as Democratic lawmakers press the agency to consider reducing principal on some loans. 

Supporters, which include the Obama administration and an array of economists, say the move would keep more borrowers in their homes, save Fannie and Freddie money and help bolster the broader housing market. 

DeMarco said on Monday he is still gathering information and he hasn’t made a decision yet about whether Fannie and Freddie will take that route. The agency is continuing its discussions with the Treasury Department on offering principal reductions through the Home Affordable Modification Program (HAMP). 

“The documents from Fannie Mae and Freddie Mac provided to you reflect an open and robust interest in this topic, enthusiasm for meeting the goals of finding a workable approach for a pilot program and adherence to review of ideas from all sides, including gathering data and undertaking its analysis,” he said. 

He said that while principal forgiveness pilot programs were developed there was not the agreement needed to proceed. 

Operational concerns were the main reason why the pilot programs weren’t implemented, DeMarco said. 

“The fact that FHFA continues to consider principal forgiveness alternatives, including recent HAMP program changes initiated by the Treasury Department, belies any ideological tilt on our part, but rather a strict analytical-based approach to gathering and evaluating data to determine what options best fit within the legal constraints that fall upon this agency as conservator for the enterprises,” he wrote.