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.
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."