Housing

DeMarco Blocks Home Recovery, California Attorney General Harris Gets It Right

California Attorney General Kamala Harris recently subpoenaed Fannie Mae and Freddie Mac for information on their foreclosure proceedings in her state. While it is too early to say what will […]

California Attorney General Kamala Harris recently subpoenaed Fannie Mae and Freddie Mac for information on their foreclosure proceedings in her state. While it is too early to say what will come from the subpoena, Harris’s attention to the role of Fannie and Freddie in stemming our foreclosure crisis is a breath of fresh air. Fannie, Freddie, and their regulator — the Federal Housing Finance Agency (FHFA), led by Acting Director Ed DeMarco — have refused to implement widely accepted servicing best practices, such as stopping foreclosure proceedings until it can be determined whether a family is eligible for a modification or reducing principal balances. In fact, Fannie and Freddie actually fine banks that do not foreclose on homeowners quickly enough.

DeMarco’s disregard for home-saving solutions has serious ramifications. Fannie and Freddie own the majority of loans processed by the largest servicers. For example, they are investors in 60 percent of the loans serviced by Bank of America and in two-thirds of the loans serviced by Wells Fargo. Since Fannie and Freddie own the loans, they dictate the terms on which servicers collect payments, offer modification, and start foreclosures. There is no question that the big banks can and should be doing more to save homes and pay for wrongful foreclosures; however, the FHFA’s firm stance against principal reduction and Fannie and Freddie’s demands for speedier foreclosures are working against the secure housing market Americans want. As Congressman Elijah Cummings (D-Maryland) recently pointed out, their policies may have actually contributed to the enduring robo-signing scandal. It is no wonder why the Occupy movement in many places has become a family’s best hope for saving their homes.

The conservatorship of Fannie and Freddie is untenable. Nevertheless, the situation is unlikely to change until the market stabilizes. Since servicers are under contract to implement the rules set by Fannie and Freddie, FHFA could do much more to leverage the two companies as positive forces in the housing market. Attorney General Harris gets it right: “If Mr. DeMarco is unwilling to support principal reduction for these home loans in crisis, he should step aside for someone who will.” DeMarco should be enforcing sound servicing practices and supporting every proven solution that saves homes and stabilizes neighborhoods. Harris’s investigation is a move toward greater transparency and accountability — something our country desperately needs to revive our housing market.

Photo by Patricia Montes Gregory

Related Articles

  • Illustration of a right hand holding a small red two-dimensional house between thumb and index finger. The hand is dark blue and the arm, shown a bit beyond the wrist, is wearing a white shirt and suit jacket. The background of the image is a city skyline, in lighter shades of the same blue, with puffy clouds above.

    Ownership Matters: Institutional Investors and Corporate Ownership

    May 23, 2024

    Who owns our homes is an absolutely essential part of housing policy, and an even greater part of housing politics.

  • A Black woman in blue flowered dress and dusty pink hijab speaks into several microphones. In foreground, blurry, are news cameras. The woman is part of a large group at a rally, carrying signs promoting rent stabilization and saying "Home to Stay MPLS"

    Affordable Housing Sector Split on Rent Control

    May 21, 2024

    In the Twin Cities, where voters have recently supported rent control, most nonprofit housing developers have stayed silent, and some have openly lined up with the developers and landlords who oppose it.

  • Seven people wearing jackets and caps on a city sidewalk holding signs that say "Listen to UREB," "Save Our Homes," "Negotiate with UREB," or "5,000 Against Displacement." One person is speaking into a microphone. At the curb by the speaker is a van with WRLC painted on the side, for Western Reserve Land Conservancy.

    Nonprofit to Close Mobile Home Community to Build a Park

    May 10, 2024

    Ohio’s largest conservation land trust has been accused of purchasing a manufactured housing community with the very intention of closing it, evicting more than 100 households in the process. But proponents of the park’s closure say the land's failing infrastructure—and the benefit the property will bring to an entire city—is what forced the decision.