The president’s plan is good, but some House Democrats want it to go further on principal write-downs.
George ZornickPresident Obama’s plan for homeowner relief, announced yesterday, would allow homeowners who are current on their mortgages refinance at today’s low rates—even if they’re underwater. It could provide thousands of dollars of relief to millions of homeowners, which would also provide a boost to the economy.
However, as I mentioned yesterday, the plan falls short when it comes to principal write-downs by GSEs like Fannie Mae and Freddie Mac. The plan provides all kinds of incentives for these principal write-downs to occur, when it’s clearly in the authority of the Federal Housing Finance Agency to simply force Fannie and Freddie to write them down immediately.
The FHFA director, Edward DeMarco, has so far refused to do so, and has frequently been a target of some House Democrats for that reason. Yesterday, Representative John Conyers Jr., a powerful voice in the House Democratic caucus, praised Obama’s plan but called for immediate action on GSE write-downs:
“The plan the Obama Administration sent to Congress today will help bolster the housing market and provide much needed relief to homeowners who owe more on their mortgages than the value of their homes. Congress should put the well-being of the American people above political posturing and pass this deficit neutral, common sense plan immediately. […]
“A good place to start would be for Congress to require government-backed lenders Fannie Mae and Freddie Mac to write down the principal of the mortgages they own. As I have argued for many years, such an action would provide immediate assistance to homeowners, provide a positive jolt to the economy, and lower taxpayers’ liability by helping keep homeowners current on their mortgage payments.
“Fannie and Freddie’s regulator, the Federal Housing Financing Agency (FHFA), has the power to implement a principal reduction program. However, up until now its Director has failed to implement such a program. If FHFA refuses to act to stem the tide of foreclosures destroying communities in Southeast Michigan and across the country, Congress must provide the leadership that FHFA has failed to exercise.”
That’s a thinly veiled call for Obama to can DeMarco and put a new director in place via recess appointment. House Democrats have asked for that in the past, and I’d expect those calls to only get stronger.
George ZornickTwitterGeorge Zornick is The Nation's former Washington editor.