Pressure on Fannie & Freddie Overseer to Forgive Debt

The Congressional Progressive Caucus today called on Edward DeMarco, the acting director of the Federal Housing Finance Agency, to write down mortgage principal amounts for homeowners who couldn’t make payments.

The CPC asked the overseer of Fannie Mae and Freddie Mac, which guarantee more than half of the mortgages in the country, to embrace “debt forgiveness.” DeMarco defended the FHFA’s role in helping homeowners avoid foreclosure in testimony to the Senate Banking Committee on Tuesday.

“Twelve million Americans owe more money than their home is worth,” Rep. Jesse Jackson Jr. (D-Ill.) said. “The American people have been duped, lied to and unnecessarily kicked out of their homes.

“Now it’s time for Mr. DeMarco to stand up and do the right thing,” he added. “We saved the banks with an $800 billion bailout. It’s time we saved the homeowners.”

DeMarco has been asked by California Attorney General Kamala Harris to suspend foreclosures while the FHFA’s stance against debt forgiveness.

He told the Senate panel that cutting the loan’s interest rate, forbearance and extending the term of the loan are all better options than principal reduction.

Reps. Raúl M. Grijalva and Keith Ellison, co-chairmen of the CPC, noted in a statement that “progressive organizations and families struggling to keep their homes” protested yesterday outside regional Freddie Mac offices “demanding fair negotiations for themselves and other Americans who have been evicted from their homes.”

“Underwater homeowners need justice,” Grijalva and Ellison said. “Write downs are about keeping families in their homes and saving taxpayers money by preventing foreclosures. Simple, straightforward principal reductions are a good way to prevent the foreclosure crisis anchor from dragging down the U.S. recovery.”

Debt forgiveness is also being pushed by the Obama administration, with Housing and Urban Development Secretary Shaun Donovan saying that principal reduction isn’t being utilized enough.

DeMarco has held firm in his stance that these principal reductions would hurt taxpayers, while noting that his agency has “a responsibility to find all prudent actions” to prevent foreclosures.

On Monday, 115 House members sent DeMarco a letter urging him to let Freddie and Fannie write down loans.