U.S. Senators Robert Menendez (D-NJ), Chairman of the Housing Subcommittee, Jack Reed (D-RI), Chairman of the Securities Subcommittee, Mark Warner (D-VA), Chairman of the International Trade and Finance Subcommittee and Jeff Merkley (D-OR) today led a group of 30 Senators in calling on Acting Director of the Federal Housing Finance Agency (FHFA) Edward DeMarco to provide Congress with an accurate analysis of the effects on taxpayers of using principal forgiveness versus other mortgage modification options such as principal forbearance for loans backed by Fannie Mae and Freddie Mac. In a letter to DeMarco, the Senators pointed out a series of flaws in the agency's previous analysis and asked for an accurate analysis within 30 days, calling it "not only part of your responsibility as conservator to conserve taxpayer assets, but also part of your statutory responsibility to maximize assistance for homeowners to minimize foreclosures."
"We believe that the analysis has several critical flaws and also has not been updated for new developments," the Senators wrote. "We respectfully request that FHFA update its initial study, refining the earlier analysis and including new developments - especially the Administration's tripling of incentives for principal reduction. We believe that FHFA must be fully transparent with this new analysis and look at targeted solutions for borrowers in different situations, rather than the "all or nothing' approach that was used in the previous analysis."
Witnesses at a recent Senate Housing Subcommittee hearing chaired by Senator Menendez testified that the FHFA's original analysis failed to consider whether Fannie and Freddie loans had mortgage insurance or not, failed to use real world principal reduction data, and had a variety of other technical flaws that could have changed the outcome of FHFA's analysis.
The letter was signed 30 Senators: Menendez, Reed, Merkley, Warner, Whitehouse, Wyden, Brown, Kerry, Shaheen, Levin, Carper, Feinstein, Franken, Durbin, Coons, Lautenberg, Akaka, Bennet, Bingaman, Schumer, Begich, Pryor, Boxer, Sanders, Cardin, Cantwell, Blumenthal, Gillibrand, Leahy and Murray.