James Lockhart, the former director of the Federal Housing Finance Agency (FHFA), has joined the debate on whether the agency should reverse its policies against principal reductions on mortgages owned by Fannie Mae and Freddie Mac.
TheHill.com reports that Lockhart, in a presentation yesterday at a Washington, D.C., forum sponsored by Bloomberg News, did not endorse a change of FHFA policy. However, he suggested that the FHFA should investigate principal reduction as one of several options to address the foreclosure crisis.
‘There should be some experimentation,’ said Lockhart, who was also the director of the FHFA's predecessor, the Office of Federal Housing Enterprise Oversight. ‘You need to look at various alternatives. Foreclosure is not the answer.
‘If there is principal forgiveness, there should be some sort of shared appreciation to go with it, or every time you make a payment you give a little of your principal forgiveness,’ Lockhart added. ‘I don't think [it should be] a massive program, at this point, because we don't know enough, but we should [start] looking at the alternatives.’
Separately, Rep. Elijah Cummings, D-Md., continued his attacks against FHFA Acting Director Edward DeMarco's decision not to pursue principal reduction. Speaking yesterday before a Washington, D.C., meeting of the National Association of Real Estate Brokers, Cummings insisted that DeMarco ‘has a duty and an obligation to allow the use of principal reduction.’
‘That's Mr. DeMarco's mandate,’ Cummings said. ‘That is what Congress directed him to do. If principal reduction will save the taxpayers money, he should be doing it now. All of the major banks do some form of principal reduction for mortgages that they own. Unfortunately, a significant portion of homeowners do not have access to this form of aid because their mortgages are owned by Fannie Mae and Freddie Mac.’