U.S. Senator Bob Corker, R-Tenn., a member of the Banking, Housing and Urban Affairs Committee, made the following statement today in response to a decision by Federal Housing Finance Agency Acting Director Ed DeMarco who rejected a proposal by the Obama administration to use taxpayer dollars to reduce principal on mortgages guaranteed by Fannie Mae and Freddie Mac in which borrowers owe more than their homes are worth. FHFA's analysis found such a policy would encourage underwater borrowers, most of whom are current, to stop making payments so they can benefit from a taxpayer-funded principal reduction. This outcome would put taxpayers at risk and would not reduce the chances of foreclosure for these borrowers.
"I thank Ed DeMarco for making his decision based on objective analysis and with the taxpayer in mind. As I said in April, we should not be using taxpayer funds to encourage homeowners to default on their loans, and I'm glad that Acting Director DeMarco refused to bend to the political pressures on him to do just that," said Corker.
In an April letter to DeMarco, Corker encouraged the FHFA to reject the Treasury Department's principal reduction plan and pledged to work on legislation to wind down Fannie Mae and Freddie Mac.
"As policy makers, we should reward responsible behavior, not encourage reckless behavior. At no time should any program designed by the government discourage those borrowers working hard to stay current on their mortgages from doing so," said Corker in his letter to DeMarco in April. "[W]hile you have been put into a difficult situation by Congress and the Treasury Department, please know that I will be working hard to convince my colleagues in the Senate to finally act responsibly and to give you long-term direction for Fannie and Freddie. It is growing more and more clear to me that as long as these GSEs exist in their current forms, the administration and Congress will use them to pursue misdirected initiatives like this. Many in Congress have taken to making the FHFA a convenient scapegoat but have neglected to put forth a plan for the agencies you now oversee. This is unacceptable, and I hope that it will soon change."
In November of last year, Corker introduced the Residential Mortgage Market Privatization and Standardization Act to responsibly unwind government-sponsored enterprises Fannie Mae and Freddie Mac and end dependence on the government for housing finance.