DeMarco Opponents Continue to Relentless Push for Replacement

Two state's attorneys general have raised the public profile of their earlier requests that Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA) be replaced.  New York Attorney General Eric T. Schneiderman and his Massachusetts counterpart Martha Coakley published an op-ed piece in the on-line magazine Politico today explaining the reasons they and seven other attorneys general demanded DeMarco's ouster in letters sent last month to the President and leaders of both parties in the House and Senate.

Schneiderman and Coakley wrote in Politico that they believe DeMarco "is standing in the way of progress toward a full economic recovery and hurting families across the country."  They cite his repeated refusals to allow Fannie Mae and Freddie, which are in conservatorship under his agency, to make principal write-downs for underwater mortgages.  " At a House Financial Services Committee hearing last week, DeMarco was questioned by Congress and confronted by protesters calling for mortgage principal reduction, but he again refused to change his position," they wrote, calling it a failed policy that is a direct impediment to economic recovery and standing in the way of efforts to provide much-needed assistance to homeowners across the country.

The attorney's general said that the national mortgage settlement in which 49 states participated has delivered billions in relief to homeowners at risk of foreclosure including over $17 billion in mortgage principal reductions. "We are working to get more relief from lenders in the private sector," Schneiderman and Coakley write, "but these efforts are undercut by DeMarco's refusal to cooperate. The reality is, more than half of all mortgages in America are owned or guaranteed by Fannie Mae or Freddie Mac."

They point to a study within FHFA that found overall positive results would come from principal reduction but DeMarco continues to argue that principal reductions would weaken the finances of FHFA and produce a financial loss for taxpayers.  The two contend these are two separate questions, only one of which is DeMarco's responsibility.  "He is responsible for the fiscal health of his agency. FHFA estimated that it would come out ahead by $3.7 billion from the administration's plan because of the aid from the Treasury Department. It's likely that taxpayers as a whole will come out ahead as well. But even if they don't, if the administration opts to use public resources to support a policy that prevents foreclosures, stimulates the economy and creates jobs, it's not the place of an acting agency head to stand in the way."

In addition to reducing the incidence of foreclosure the article says that principal reduction actually can increase the lifetime value of a mortgage by reducing the likelihood of default and it is far more profitable for any financial institution to hold a portfolio of performing $200,000 mortgages that keep families in their homes than a portfolio of nonperforming $250,000 mortgages headed toward default. Finally they argue that homeowners with mortgages owned or guaranteed by Fannie Mae and Freddie Mac deserve the same help as private mortgage servicers have begun to provide to their borrowers.

"The president can unlock the door for his own very sensible policy, and potentially open doors for millions of job-seekers as well, by appointing a new director at FHFA," the article concludes. "For Americans who are fed up with Washington obstructionists holding back help for the middle class, this is one obstruction the president should be eager to remove."