FHFA’S NEW POLICY REPRESENTS ONGOING LOST OPPORTUNITY TO HELP AMERICAN FAMILIES
KEEP THEIR HOMES.
Responding to news from FHFA about the agency’s new principal reduction policy, Kevin Stein, associate
director at CRC released this statement:
“Today’s announcement by FHFA that principal reduction loan modifications will be available on a limited basis for Fannie Mae and Freddie Mac (“GSE”) loans is the poster child for “way too little, way too late.
California families have been facing foreclosure in large numbers since the start of this crisis, and have needed principal reduction loan modifications to retain their homes. As most mortgage loans have been backed by Fannie Mae or Freddie Mac, the failure of FHFA to allow for principal reduction loan modifications led to countless unnecessary foreclosures, untold family disruption, and destabilized communities throughout California and the U.S.
We are glad for the 33,000 families that FHFA estimates could benefit from this action, though we suspect that few of these families will reside in California, where housing costs and unpaid principal balances well exceed the $250,000 limit included in this policy.
We suggest FHFA further improve and expand this program to provide relief to more households. CoreLogic’s
recent report found that 4.3 million homes still have negative equity as of December 2015.
FHFA also announced certain changes to its Non-Performing Loan Sales which we hope will result in nonprofit
Community Development Financial Institutions (CDFIs) (instead of for-profit investors) securing delinquent
loans from the GSEs. CDFIs are mission-driven to help people keep their homes, to preserve affordable housing,
and to maximize community stability.
In 2009, CRC raised principal reduction as a key and missing component to the US government’s main
foreclosure prevention program.
In 2011, CRC and 15 CRC members and allies provided extensive recommendations to FHFA on addressing the
foreclosure crisis through improving their loan modification policies (including through principal reductions)
and improving their REO disposition policies.
Again, in 2012, CRC and 96 of our members and allies called on FHFA, under previous Acting Director Ed
DeMarco, to allow for principal reduction on all GSE loans, after years of FHFA foot dragging on the issue of
whether principal reduction would be available on GSE loans.
In 2014, CRC joined Americans for Financial Reform and 200 other organizations in urging FHFA to provide
principal reductions as part of a sensible strategy to help keep more Americans in their homes.
CRC’s 2015 “REO to Rental Report,” described ongoing destabilization in California communities, partly due to
FHFA not providing sustainable loan modifications that include principal reductions. The report provides
recommendations for how FHA could