Principal Forgiveness Decision Delayed, But Not Dead
The Federal Housing Finance Agency has postponed a decision on principal forgiveness for Fannie Mae and Freddie Mac-owned mortgage loans; but, according to a statement, the idea isn’t completely off the table, either.
“FHFA continues to work on its principal forgiveness analysis and is in discussions with the Department of the Treasury. A final determination on the Treasury proposal for triple investor incentives for HAMP Principal Reduction Alternative is being deferred until we conclude these activities,” a spokesperson for the agency said.
FHFA Acting Director Edward DeMarco had said April 10 in a speech at the Brookings Institute that he would consider principal forgiveness as part of the HAMP program, after the Treasury upped the ante by tripling the incentive amount it would offer, to up to 63 cents for every dollar the enterprises would write down on qualified mortgages.
However, DeMarco has been vocal in his opposition to principal forgiveness, saying such a program would encourage strategic defaults and cost taxpayers more than a forbearance program.
Mary Dunn, CUNA senior vice president and deputy general counsel, said the postponement isn’t surprising based on what DeMarco said at Brookings.
“He said he would look at it but there was no time frame, and it was clear he wasn’t embracing the idea, even though there are folks in Treasury who wanted to see this pushed,” Dunn said.