Fannie, Freddie regulator says no to reducing mortgage principal
Fannie Mae and Freddie Mac will not lower the amount struggling homeowners owe on their mortgages, their regulator declared Tuesday after a months-long delay.
The Federal Housing Finance Agency said its analysis found that principal reduction does not prevent foreclosures while saving taxpayers money. "FHFA has concluded that the anticipated benefits do not outweigh the costs and risks," said Edward DeMarco, the agency's acting director, who has steadfastly resisted calls to implement the loan modification technique. Treasury Secretary Tim Geithner, however, is not taking no for an answer. He quickly shot off an eight-page letter to DeMarco urging him to change his mind. In it, Geithner argued that allowing principal reduction would ultimately save taxpayers as much as $1 billion. "I do not believe it is the best decision for the country," Geithner wrote. "You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis."