FANNIE MAE SINKS PRINCIPAL REDUCTION PROGRAM ON IDEOLOGICAL GROUNDS

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EDITOR’S COMMENTS: Who are these people who make judgments about borrowers that are so negative? Do they really think that 20 million people woke up one morning and decided to attack the financial services industry?

Or is it possible that the financial services giants, now indicted for admittedly creating false declarations in false documents that were forged, were the culprits?

And why did anyone at Fannie Mae think they could impose their ideology to cover over the simple fact that the values used by the “lenders” were wrong?

Are you going to blame the borrowers for the appraisal too — or just for not analyzing the more than 400 loan products that proliferated from 1996-2009? And why did they lie about it when questioned by Congress?

So a plan ready to go was pulled back at the last minute in 2010, which would have averted millions of foreclosures.

Fannie Mae Nixed Plan to Reduce Mortgage Debt, Democrats Say

By Lorraine Woellert

Fannie Mae (FNMA) pulled the plug on a 2010 plan to forgive borrowers’ mortgage debt because company executives were “philosophically opposed” to the idea, a former company employee told House investigators.

In a letter today to the Federal Housing Finance Agency, House Democrats challenged a January analysis from Acting Director Edward J. DeMarco that claimed principal writedowns would raise costs and increase taxpayer losses at the government-owned company.

“We have now become aware of new information that calls into serious question the accuracy and completeness of your response, as well as your motivation for continuing to oppose principal reduction programs even when they have the potential to save American taxpayers billions of dollars,” said the letter from representatives Elijah Cummings of Maryland and John F. Teirney of Massachusetts, Democrats on the House Committee on Oversight and Government Reform.

FHFA spokeswoman Corinne Russell did not have an immediate comment. The agency oversees Fannie Mae and Freddie Mac, which were taken over by the federal government in 2008 as they neared bankruptcy.

According to the letter, a former Fannie Mae employee told the committee that the mortgage finance company had developed a pilot program for reducing mortgage debt for borrowers who owe more on their house than the property is worth.

The purpose of the plan was to develop “a responsible way to reduce principal balances for underwater mortgage borrowers without creating undue incremental moral hazard,” the employee told the committee.

The pilot had preliminary approvals from officials at Fannie Mae, FHFA, and the Office of the Comptroller of the Currency, a bank regulator, according to the former employee.

In mid-2010, two weeks before its launch, senior Fannie Mae executives cancelled the program because they were “philosophically opposed to writing down principal balances,” according to the former worker, who was quoted in the letter without being identified.

“I believe that we could be saving tens of billions of dollars while also helping stabilize housing prices and stimulating economic growth,” the former employee said, according to the letter.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net.

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

13 Responses

  1. @Ian

    Yep, but I’m afraid I’m going to get gored. The reason why most people can’t even try to fight the bastards (excuse me) off is because they can’t get any legal help and they are at a total loss as to where to even begin. We have been so terrorized when offering anyone a lending hand based on fear of reprisals and lawsuits for trying to practice law. However, if someone blogs, “I’ve been getting these terrible headaches from dealing with these scumbags day in and day out”, and someone offers a suggestion of what might help get rid of the headache; the offerer of advice does not have to worry about being sued for the attempted practice of medicine. Again, we have allowed the dictators to bully the peons and to make sure their ill deeds are challenged by few. Even the people who are able to weed their way through mounds of legal information, so many misdeeds have been committed by these criminals on each of our individual loans; that I get scrambled just trying to figure out which illdeeds to go after and which to leave behind. I can find my way once I’m pointed in the right direction. Somehow, Ian, some way, we must must must beat them.
    There are many genius legal minds out there somewhere that are willing to save the 99%.

  2. Kathryn- you seem to have taken the bull by the horns in your pro se battle, and I for one appreciate all the info which you are sharing. Fannie and Freddie are at the rotten core of the problem, and the fact that they are defending themselves using money which we as taxpayers have to give them doesn’t sit well with me. Their total unrealized (currently) “losses”, net of any derivative exposure, will probably be in the trillions. F/F is an equal opportunity employer, staffed by idiots at the top, and morons down below,so there’s an opportynity for everyone. They must have ten thousand pages of instructions for their “lending” practices. That in itelf is indicative of all which they have to cover up. The first local mortgage which I took out was 8 pages. When I sold the property, the bank (110yrs.old) took out what was owed and wrote me a check for the balance. There were no fees of any type,ever. F/F, with their ten thousand pages, as a business model, are trying to rob either the investors, the homebuyer, the insurance cos.,or the government. They are criminally negligent, hiding behind whatever facade they can fabricate.
    And, ANONYMOUS is dead on regarding all subprime ‘mortgages’ being F/F rejects, reincarnated as (unsecured) false default debt, collected by collection agencies. So of course they have to fabricate,backdate,and forge everything. You don’t get any valid documentation when you buy charged-off debt for 2 cents on the dollar.

  3. FM pulled the plug, publically, just hours after the public release of the settlement agreement? Timing was not coincidence. F/F were as complicit in this whole scheme as the banksters, wall street and their political cohorts. Judges and the legal system are terrified of them. They also probably have monies tied up in mutual retirement funds that would be impacted by any rulings against the TBTFs.

    This article is an example of what I am talking about:

    http://m.apnews.com/ap/db_6775/contentdetail.htm?contentguid=PyVYzDoC

  4. Ket me see…

    Two weeks ago, I saw that Scheneiderman was being called to work directly near Obama, in a “task force”, co-chaired with Lenny Breuer (of C & B) and what did I say? Typical case of: “Keep your friends close and your enemies closer

    That’s what he does: Hillary was a tad dangerous for his plans. So, how better get her loyalty than by having espouse and defend his foreign policies, even if she doesn’t agree with them?

    Schneiderman wanted to keep going against the banks. We saw what happened to him. Cordray won’t last long and if any of the dissidents had half a brain, they’d get the hell away from him in a jiffy!

    I’m still sure that the idea is to wage was against China. Via Iran, N. Korea, Pakistan but he is after China. Too many people there. And they refuse to di his bidding…

  5. i am fighting fannie.

  6. They signed the settlement even the AG from New York. So does this mean we can’t fight them in court for not having the note.From day one My loan was never recorded there is no proof anywhere that this credit agency owns my loan.What did this dumb ass,big ear president do.Impeach president obama NOW NOW NOW NOW

  7. Perhaps they decided it’s better to wait until all foreclosures are pushed through the system, and THEN come out with a principal reduction program. Because by then, no one will need one. LOL

    By the way, I heard back from the bank reviewing my foreclosure paperwork, Wells Fargo, regarding my complaint through the OCC.

    “We are calling to inform you that we reviewed your documents and find that the foreclosure is valid, including the eviction.”

    ANY COINCIDENCE with the AG announcement of the settlement today??? I think WF was holding off for the outcome to render their decision.

    Nice, huh??

    Was I supposed to hire an attorney for an OCC complaint? I had ample evidence, audits, and so on. The news reporting is obviously false leading homeowners to believe there is a chance for restitution.

    The reviews need to be independent, that is for sure. Further, it does appear that the settlement took the teeth out of the OCC process.

    As of now, I would tell people not to bother with the OCC Foreclosure Review process. It’s a waste of time and another ploy to get rid of you. (unless, perhaps, you have prepared the complaint in some fashion to resemble a court case? Then again, may as well file a real case against the scumbags).

  8. Joann: I am raising both hands! I am opposed to both Phoney and Fraudie.

  9. In order to do Principal Reduction you probably will expose the so Called Fraud.

    FOOD FOR THOUGHT.

  10. The real problem is that Fannie Mae is philosophically opposed to proving they own the loans, which they don’t.

    “MBS. We create both single-class and multi-class MBS. The MBS represent beneficial interests in pools of mortgage loans or in other mortgage-related securities. The MBS, and the mortgage loans and mortgage-related securities backing MBS, are not assets of Fannie Mae, except when we acquire them for mortgage portfolio investment purposes.” from 2003 10-K

    “MBS are not assets of Fannie Mae, except when acquired for investment purposes, nor are MBS
    recorded as liabilities.”

    http://www.fanniemae.com/resources/file/ir/pdf/stock-info/seriese.pdf

    There are many other links like these.

  11. Figures.

  12. “Fannie Mae (FNMA) pulled the plug on a 2010 plan to forgive borrowers’ mortgage debt because company executives were “philosophically opposed” to the idea, a former company employee told House investigators.”

    Raise your hands both sides of the isle – how many are now (even if not before) “philosophically opposed” to Fannie Mae?

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