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Wednesday, March 20, 2013

Principal Balance Reduction Hope for Fannie, Freddie Mortgage Loans?

Principal Balance Reduction Hope for Fannie, Freddie Mortgage Loans?


UPDATE ON NOVEMBER 13, 2013


Many of us have been waiting to see if a new Federal Housing Finance Agency Director would amend the Interim Director's decisions with regard to not allowing principal balance reductions on Fannie Mae and Freddie Mac loans. Of course, first a new Director would have to be nominated, confirmed, and sworn into office. President Obama nominated Congressman Mel Watt (a Democrat from NC whose district oddly includes parts of Charlotte, Winston Salem, and Greensboro) back in May. It took almost 6 full months for this nomination to come to a confirmation vote in the Senate.


The United States Senate has voted 56-42 to block further progress toward Representative Watt becoming the FHFA Director. Senator Harry Reid, a Democrat, entered a motion to reconsider this vote at a later time.


What does this mean for borrowers seeking relief whose loans are owned by Fannie Mae or Freddie Mac? While mortgage loan modifications are still available for qualified borrowers and qualified loans, for the indefinite future those modifications are not going to include a reduction of principal balance. Of course, principal balance reductions are also comparatively rare for distressed mortgage loans which are privately owned, especially if the loan was not originally a Countrywide loan.


Don't give up hope if your loan is owned by Fredie or Fannie and you need help, just don't expect any possible relief to include principal balance reduction. Also keep in mind that many borrowers think that Bank of America, Wells Fargo, Chase, Citi, Nationstar, Bayview, SunTrust, Aurora, or some other outfit owns their loan, when in fact those entities may just be the loan servicer, with said loan(s) owned by Freddie or Fannie.  Obtaining mortgage relief can be incredibly challenging, but it is not impossible. Some borrowers achieve it on their own, and some hire attorneys or non-law firm companies. We recommend that you carefully investigate any one you are considering hiring to assist you, as there are many out there who will gladly accept your money but not perform the work you pay them to. Good luck!


~~~Original Post ~~~


As an attorney who represents many homeowners and other mortgage loan borrowers in mortgage relief, mortgage dispute, and foreclosure cases, I am well aware of the frustration that many feel with regard to the position that the acting director of the Federal Housing Finance Agency (FHFA) has taken – he will not allow Fannie Mae or Freddie Mac to participate in mortgage relief programs which include possible reduction of principal loan balance. The FHFA was created in 2008 as part of the Housing and Economic Recovery Act.


FHFA-logo


A typical mortgage loan which does not involve Fannie Mae or Freddie Mac may be eligible for reduction of the loans balance. This is especially true for situations which the loan balance is greater than the property’s value; this is what the term “underwater” refers to.


There has been an ongoing dispute between Edward DeMarco, the Acting Director of FHFA and many other government leaders regarding the refusal of Mr. DeMarco to allow Fannie and Freddie loans to be eligible for principal balance reduction.


This infighting at the federal level has been going on since at least 2011 (when Mr. DeMarco refused to cooperate with a President Obama plan), and was increased by Mr. DeMarco’s refusal to allow principal balance reductions for Fannie and Freddie loans under the $25 billion dollar National Mortgage Settlement of 2012. Well, this dispute is heating up rapidly. In fact, in February, 2013 45 members of the United States House of Representatives sent a letter to President Obama, demanding that Mr. DeMarco be replaced as leader of FHFA.


The latest development is that Attorneys General from nine different states sent a request to President Obama, the United States Senate Majority Leader, and the United States Senate Minority Leader last week also asking for Mr. DeMarco to be replaced. One of the Attorneys General involved, Eric Schneiderman of New York, stated that FHFA needs a leader which will allow it to be “a partner, not an impediment, in the national effort to comprehensively address the foreclosure crisis.”


The rest of the Attorneys General who joined in this letter are from California, Delaware, Illinois, Maryland, Massachusetts, Nevada, Oregon, and Washington. No, unfortunately the Attorneys General for Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee (states in which this Firm practices) did not participate in this request, at least not formally. The letter, which represents a very direct and serious challenge to Mr. DeMarco’s “Interim Leadership” of FHFA, closes by stating “We believe until new, permanent leadership is named to FHFA [it] will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis.”


One of the points made by these Attorneys General is that having more healthy and performing loans (by allowing principal balance reductions which would give those borrowers a fighting chance) is wiser and makes more financial sense for everyone as compared to refusing to offer this type of assistance and having these borrowers continue to struggle, to be foreclosed upon, etc. One huge advantage of principal loan balance forgiveness is that it can create a short-cut through the otherwise very lengthy mortgage loan modification process. Modifying more loans more quickly is extremely important, as lenders often refuse to halt the foreclosure process even when a modification application is pending.


Things appear to be reaching another boiling point in Washington, D.C. Mr. DeMarco may be out of work soon, and distressed mortgage loan borrowers may be better off for it.


McGrath & Spielberger, PLLC provides assistance to borrowers in need of mortgage relief services, such as mortgage loan modification, foreclosure negotiation, refinancing, and deed-in-lieu or other negotiated settlement resolutions.