Yesterday, the Minneapolis, Minnesota City Council approved an amendment to its fiscal year 2013 Federal Agenda, calling on the Federal Housing Finance Agency (FHFA) to establish a principal reduction program for Fannie Mae and Freddie Mac owned or insured rental mortgages From Minnesotans for a Fair Economy’s press release:
According to the amendment approved today, “Fannie Mae and Freddie Mac own or insure approximately 60% of the nation’s residential mortgages. As a result of the foreclosure crisis, the two agencies and private mortgage firms have been urged by housing advocates and governments to develop policies to assist homeowners to remain in their homes. Among the policies have been mortgage modification programs that include lower monthly payments, forbearance, principal reduction, shared equity and a combination of the programs. A recent court settlement involving mortgage lenders, the states and the federal government will provide refinancing and form of principal reduction to homeowners whose homes are “underwater” – mortgage value exceeds home value. The principal reduction program is available to loans serviced by banks but loans backed by Fannie Mae and Freddie Mac are not eligible for the program.”
The foreclosure crisis is so scary that nobody seems to want to measure just how big and scary it really is, because if they measured it, then they’d have to deal with it. This also allows people like Wells Fargo’s home loans head, Mike Heid, to get away with spewing things like this.
But we don’t have to wait for accurate measurements of the scope of the problem to take effective action against it. Mortgage principal reductions provide the most taxpayer bang for the buck, which is why the anti-Fannie/Freddie-principal-reduction stance of acting FHFA head Ed DeMarco has aroused so much ire. Kudos to the Minneapolis City Council for taking a very public stand on this.