Remaining Hurdles Dampen Positive Changes to the Housing Market

Over the past month, the Obama administration has achieved several Home for Good victories for homeowners and consumers.  Among them was the bold move Obama made to appoint the director of the Consumer Financial Protection Bureau to defend consumers from abusive financial services and scams.  NCLR commends the president for making this recess appointment particularly at a time when noxious politics fly in the face of strong policy.  Obama also advanced provisions that will help unemployed homeowners remain in their homes for up to 12 months while they secure a new job; this is a vast improvement from previous three- and six-month time frames allotted.  Finally, the administration announced the creation of a new working group that will investigate and take on offenders and abusers of the housing crisis. 

Each of these incremental changes rebuilds a better financial future for those struggling to make ends meet; however, the president has been slow to offer a reform strategy for Fannie Mae and Freddie Mac.  While the administration made a significant move to break open the yet untouchable loans in Fannie and Freddie—they tripled incentives for granting homeowners principal reductions—there remains a fly in the ointment.  The adoption of principal reductions for Fannie and Freddie lies in the hands of Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA).  DeMarco has refused to write down these mortgages.  Since placed in his temporary FHFA position, he has become known for his narrow view of Fannie and Freddie’s role in aiding the recovery of our housing market.  The added incentives remove one of the arguments he has made against principal reduction. 

Principal writedowns have proven to be one of the most effective methods of helping underwater families hold onto their homes and preserve our neighborhoods.  When compared with the holding costs and the loss of selling a home for pennies on the dollar at a sheriff sale, it is not difficult to see that principal reduction is a win for investors, neighborhoods, and families.  The new incentives for principal reduction are not wholesale solutions; they are promising course corrections that can rebuild the housing market.  If DeMarco does not seize this new opportunity to help families, the White House must relieve DeMarco of his position and permanently appoint a new director.

Photo of Edward DeMarco courtesy of FHFA.

Janis Bowdler is president of the JPMorgan Chase Foundation. Bowdler joined JPMorgan Chase in 2013, before which she served as director of economic policy at the National Council of La Raza (NCLR, now UnidosUS). Bowdler also served as a project manager at Famicos Foundation, a community development corporation working in the Hough and Glenville neighborhoods of Cleveland, Ohio.


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