NY Attorney General Not a Big Fan of DeMarco, Doesn't Mind Saying so

In a relatively scathing op-ed published today in the New York Daily News, New York State Attorney General Eric T. Schneiderman again called on President Obama to appoint a new acting director of the Federal Housing Finance Agency (FHFA). 

On May 1 the President named Congressman Mel Watt (D-NC) to serve as director of the agency which is regulator of the Federal Home Loan Banks and both regulator and conservator of Fannie Mae and Freddie Mac (the GSEs).  Watt would replace Edward J. DeMarco, a Bush administration holdover who has been acting director of the agency since 2009.  The Senate failed to confirm Obama's first nominee to the post.  

As he commended the President on the nomination of Watt last week, Schneiderman said "struggling homeowners cannot afford to wait for the Senate to complete the confirmation process," and called for DeMarco's immediate removal and appointment of a new acting director.   

At that time Schneiderman said, that each passing day thousands of American homeowners are at greater risk of entering foreclosure because DeMarco has refused to allow the GSEs to write down principal balances for underwater mortgages.  He quoted Mortgage Bankers Association figures that a quarter-million new families enter into foreclosure each quarter and that roughly 60 percent of all mortgages in the country are owned by Fannie Mae and Freddie Mac.

Schneiderman reiterated this request in his op-ed today, saying that the President's move "to replace a little-known but powerful Washington bureaucrat who has stood in the way of important efforts to end America's foreclosure crisis" was a good first step, but further action is needed to provide homeowners with swift and fair relief.

DeMarco should have been a critical figure in setting policy to end the foreclosure crisis according to the AG, "Instead, DeMarco's most notable achievement has been blocking programs to help struggling homeowners."

Over 21 percent of all homes with a mortgage had negative equity in the fourth quarter of 2012 and banks move to foreclose on 2,700 homes each day, Schneiderman said.  In many cases, however foreclosures can be avoided by simply reducing the amount that homeowners owe. "Principal write-downs are a necessary and common-sense tool in the massive repair job that is needed to mend our broken housing market."

But when the White House proposed expanding these write-downs for GSE-owned mortgages, DeMarco killed the initiative at great cost to millions of homeowners and to the housing market, generally: According to the Congressional Budget Office, approximately 1.2 million homeowners with Fannie and Freddie mortgages are in need of principal reduction. That's roughly 40% of all underwater homeowners in the United States, according to the op-ed.

So why is this man, a Bush appointee, "still wielding so much power as head of this important agency?  Because two years ago, Senate Republicans made it clear they would block the confirmation of a new, permanent head of the agency in order to preserve DeMarco's power and policies."

Schneiderman said Watt, a member of the House Financial Services Committee, is prepared to battle for his confirmation but the outcome is far from certain.  Even if the nomination succeeds, how long will it take and how many more homeowners will lose their homes before he can take office?  "There is a quicker way to get rid of DeMarco now, and pave the way for a new policy direction for the Federal Housing Finance Agency. He can be replaced as acting director by one of the agency's three deputy directors - today".

With a new acting director, the agency can quickly move to stanch the bleeding and bring relief to struggling homeowners, Schneiderman said, pointing to a Congressional Budget Office estimate that an additional 600,000 GSE borrowers could go into default over the next two years.  An interim appointment would also remove any reason for Senate Republicans to hold up Watt's nomination. "The President will have taken their leverage away and ensured responsible leadership for the agency."