Well,
it seems there is a bit of hypocrisy coming out of Washington for a
little change of pace. President Obama announced his nomination of
congressman Mel Watt (D-NC) for director of the Federal Housing Finance
Agency (FHFA). Many homeowners around the country were delighted by
this selection because Congressman Watt has a history of supporting
principal reduction in loan modification programs.
The
hope is that he will continue this position during his tenure as head
of the FHFA. Current acting director of the FHFA, Edward DeMarco, has
refused to allow Fannie Mae and Freddie Mac to include principal
write-downs in their loan modification arsenals. Demarco argues that the
practice not only jeopardizes the American taxpayers, but also rewards
poor payment history and sets a bad example. Now Watt could be causing
problems in this area himself. During his confirmation hearing in the
Senate last week, Watt said that while he would not preemptively refuse
to engage in write-downs, he also would not endorse the policy.
Instead, he promised to “study carefully how that decision [to not do
write-downs] was reached, what it was based on, and then I would build
on that new information…and make a responsible decision.”
Not
surprisingly, Watt’s apparent reluctance has upset many home owners who
believed that he would definitely approve the controversial measure to
engage in principal reductions as part of a loan modification program.
He has been accused of backtracking and failing his constituents. This
is particularly alarming since Watt was a vocal critic of DeMarco’s
policies as a congressman. Watt responded that while it was his
responsibility to support write-downs as a congressman because he had
many underwater borrowers in his district, as director of the FHFA he
would have to be “a strong advocate for taxpayers”.
Watt is likely treading lightly around this issue because one
presidential nominee to replace DeMarco has already been blocked.
As my Mother was known to say, “We will see what we shall see”
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