In a dramatically hostile exchange of accusations played out in public letters, two congressional Democrats and the head of the Federal Housing Finance Agency (FHFA) leveled charges of political game-playing in connection to the agency's refusal to allow principal reductions on mortgages owned by government-sponsored enterprises.
In a letter to FHFA Acting Director Edward DeMarco (pictured left), Reps. Elijah Cummings, D-Md., and John Tierney, D-Mass., accused the regulator of canceling a 2009 pilot program at Fannie Mae that would have tested principal reduction and then withholding information that the program existed.
‘During your testimony on Nov. 16, 2011, you insisted that you had personally examined information from both enterprises and concluded that allowing principal reductions would not be in the best interests of taxpayers,’ the congressmen wrote. ‘Contrary to your testimony, we have now obtained a wide range of internal documents demonstrating that Fannie Mae officials conducted detailed, substantive analyses and concluded years ago that principal-reduction programs have enormous potential to save U.S. taxpayers significant amounts of money by reducing overall losses from foreclosures following default. Although we recently obtained some of these documents directly from you in response to our request last November, we obtained from an independent source several additional documents that are labeled 'confidential,' 'proprietary,' and 'internal,' and that you apparently have been withholding from Congress.
‘For more than five months since you testified before the Oversight Committee, we have been trying to obtain documents and data that you promised to provide explaining why the FHFA has refused to allow principal reductions for borrowers with mortgages backed by Fannie Mae and Freddie Mac,’ the congressmen continued. ‘Despite the clear conclusion reached by Fannie Mae officials that principal reduction would reduce losses to the taxpayer, this pilot program was prevented from ever getting off the ground. It remains unclear why you failed to mention this in your testimony and why you failed to disclose this principal-reduction program to the committee.’
The lawmakers added that the cancellation of the Fannie Mae program was ‘not merely a missed opportunity, but a conscious choice that appears to have been based on ideology rather than Fannie Mae's own data and analyses.’
DeMarco responded later in the day with a letter to Cummings and Tierney that openly questioned their conclusions.
‘I wish to convey my disappointment with this letter, the failure to contact FHFA to address your concerns, and the release of selective elements of the proprietary and confidential materials you received,’ DeMarco wrote. ‘I strongly disagree with any characterization of FHFA's work or motives as anything but in keeping with the professionalism expected of this agency. FHFA has endeavored to provide responses to your requests relating to principal-forgiveness pilot programs in a timely fashion.
‘Throughout FHFA's communications with you and the committee, we have focused on getting to the facts and the supporting information and analytics in what is a most important matter for homeowners and taxpayers,’ he continued. ‘I would note that since 2009 FHFA has approved multiple pilot programs to look into the various alternatives to principal forgiveness. These occurred even before the Treasury Department instituted its HAMP Principal Reduction Alternative. These approvals certainly do not reflect any pre-determined view on my part.’