As the debate over whether or not to offer principal reduction to struggling homeowners has returned to the forefront of housing policy, New York Attorney General Eric Schneiderman has written a letter to FHFA Director Mel Watt [1] asking the Director to “broadly and quickly” implement a plan offering principal reduction to homeowners facing foreclosure.
Schneiderman, who during his time in office has been a fierce advocate of preventing foreclosures and foreclosure relief scams, said in his letter on Friday that offering principal reduction is “a policy that I have advocated strongly for, that I am pleased FHFA is now seriously evaluating, and that should be deployed broadly and quickly to homeowners in desperate need of this relief from the continuing damage caused by the housing crisis.”
The principal reduction issue pre-dates Watt’s tenure as FHFA Director, which began in January 2014. In 2012, then-FHFA Director Ed DeMarco issued a statement [2] after careful consideration that there would be no policy change with regard to principal reduction because “the anticipated benefits do not outweigh the costs and risks.”
Watt re-opened the issue and ignited the hopes of housing advocates and at-risk homeowners when, on March 22 in a public speech [3], he said that he would make a decision in the next 30 days as to whether or not there would be a policy change to offer principal reduction. The calls for principal reduction reached a fever pitch in early April when Watt’s fireside chat-style event on housing policy [4] at Harvard Law School was cut short due to unruly behavior of protesters demanding principal reduction.
“(A principal reduction policy) should be deployed broadly and quickly to homeowners in desperate need of this relief from the continuing damage caused by the housing crisis.”
New York AG Eric Schneiderman
Now Schneiderman has joined the ranks of those urging Watt to offer principal reduction to homeowners facing foreclosure. Schneiderman pointed out in his letter that “virtually all of the large commercial single-family lenders now include principal reduction in their foreclosure mitigation options for struggling borrowers” and that Fannie Mae’s and Freddie Mac’s refusal to offer principal reduction is “causing countless numbers of families to remain at risk.”
“I urge you to move swiftly to create a principal reduction loan modification program and to ensure that this relief is provided to as many homeowners as possible, as it is the surest way to help the tens and thousands of families, both in New York State and throughout the country, who desperately need this relief,” Scheiderman said.
Click here [1] to view Schneiderman’s letter.