Ninety-seven California community groups, led by the California Reinvestment Coalition (CRC), have submitted a detailed comment letter to Acting Federal Housing Finance Agency (FHFA) Director Edward J. DeMarco demanding changes to the FHFA's foreclosure policies, or his immediate resignation. The 97 groups are united in their concern about homeowners and tenants being displaced by FHFA's damaging policies. The coalition believes that the FHFA, under the guidance of DeMarco, has failed to prioritize the needs of homeowners who are struggling to make their mortgage payments. As the conservator of Fannie Mae and Freddie Mac, FHFA controls nearly 60 percent of all home loans nationwide.
In the letter, the 97 groups urge DeMarco to put a pause on Fannie Mae and Freddie Mac foreclosures until FHFA formalizes policies to:
►Reduce principal: FHFA should allow Fannie Mae and Freddie Mac to offer loan modifications containing principal reduction down to market value. In the California Reinvestment Coalition's February 2012 survey of 75 housing counselors who assist thousands of Californians a month, more than 40 percent of respondents noted that banks sometimes or often reduce principal where they own the loan in question. Although the banks see the utility of principal reduction, the GSEs never reduce principal.
►Stop the dual track: Affected homeowners and their advocates continue to rank dual track as one of the most pernicious and prevalent practices that frustrates efforts to halt avoidable foreclosures. FHFA should refuse to allow Fannie Mae and Freddie Mac servicers from continuing the foreclosure process while borrowers are negotiating for a loan modification.
►Offer tenants long-term leases: According to Tenants Together, tenants make up approximately 38 percent of California households impacted by the foreclosure crisis. Tenants living in homes that go into foreclosure are perhaps the most vulnerable of stakeholders. These families are often completely unaware that their landlord is unable to pay the mortgage and at risk of foreclosure. FHFA should require Fannie Mae and Freddie Mac to offer tenants residing in foreclosed properties the option of a two-year lease if they wish to remain in their homes.
"Principal reduction is a cost-effective way to help homeowners keep their homes and should be part of the GSE menu of options for foreclosure avoidance," said Maeve Elise Brown, Executive Director of Housing and Economic Rights Advocates (HERA).
"The recent $26 billion Attorneys General settlement provides some relief for homeowners, but Fannie and Freddie borrowers are completely on their own. The majority of the loans in distress in California are owned by FHFA, and until they change their policies, more Californians will continue to suffer," said Kevin Stein, Associate Director of the California Reinvestment Coalition. "This calls for immediate changes to FHFA policies, and strong state legislation that protects and relieves California homeowners from irresponsible practices."
If DeMarco cannot commit to making these policy changes, the groups have called for his immediate resignation.