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Tag Archives: Principal Writedown

In California, GSE-Backed Loans to Accept Funds for Reducing Principal

Due to one important adjustment, Fannie Mae and Freddie Mac might start accepting funds to be applied toward principal reduction in California. The Keep Your Home California program once required participants in its principal reduction program to match funds it provided towards reducing principal. Recently, housing finance agency officials from the state announced a decision to no longer require lenders to match the funds the program provides, the L.A. Times first reported.

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BofA to Offer Principal Writedowns to 200K Delinquent Borrowers

Bank of America began mailing out more than 200,000 letters this week targeting borrowers thought to be eligible for principal-reducing modifications under terms of the settlement reached with the federal government and 49 state attorneys general. To be eligible, a homeowner must owe more on the mortgage than the property is worth today and must have been at least 60 days behind on payments on January 31, 2012. BofA estimates average monthly savings of 30 percent for qualifying customers.

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Principal Reduction: A Matter of Analysis or Ideology for DeMarco?

Based on documents Reps. Elijah Cummings (D-Maryland.) and John Tierney (D-Massachusetts) received, Acting Director Edward DeMarco's reason for not allowing principal reduction appears to be based on ideology, not analysis, according to a May 1 letter they wrote to the director. The letter states beginning in 2009, Fannie Mae officials worked with Citibank to develop a ""shared equity"" principal reduction pilot program that was ""suddenly suspended"" in July 2010. In the letter, the representatives stated that on February 8, a former Fannie Mae employee informed them the pilot program on principal reduction was terminated by officials who were ""philosophically opposed to writing down principal balances.""

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Behind the $25B Settlement: Joe Smith

Parties to the landmark mortgage servicing settlement appointed one man to oversee $25 billion in compliance. In an interview with DS News, Joseph A. Smith, onetime banking commissioner for North Carolina and ex-nominee to head the Federal Housing Finance Agency, lays out the role he envisions playing as he monitors funds for homeowners, states, and the federal government. The settlement monitor speaks with an understated tone about his stewardship of the historic settlement, which 49 state attorneys general and federal officials completed in February.

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Call for GSEs to Apply Principal Reduction Continues

In a speech to the National Council of State Housing Agencies on Monday, a Treasury official named a number of measures to address challenges in the housing market, and stressed one solution that has not been applied by Fannie Mae and Freddie Mac: principal reduction. Mary Miller, under secretary for domestic finance, says given the large percentage of outstanding mortgages that are currently backed by Fannie or Freddie, it is important that the GSEs participate in the principal reduction alternative of the Home Affordable Modification Program.

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Fitch Comments on JPMorgan’s and Wells’ Reclassification of 2nd Liens

With their 2012 first quarter earnings, JPMorgan and Wells Fargo revealed the reclassification of $1.6 billion and $1.7 billion, respectively, in second lien mortgages as nonperforming loans even though they are not yet delinquent. Fitch Ratings said it believes many U.S. banks are likely to follow suit, and that it does ""not view this as a material shift in the performance of these loans."" Both banks cited regulatory guidance as reasons for the reclassification. The reclassified loans are second liens associated with delinquent first liens. In cases involving delinquent loans, second liens are written off before a first lien takes any losses.

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Head of IMF Calls for Principal Reductions for American Homeowners

The head of one of the world's most powerful financial policy bodies has tossed her hat into the debate over mortgage principal reductions. Christine Lagarde, managing director of the International Monetary Fund (IMF), says ""the housing problem in the U.S. is something that needs to be addressed"" and it is ""a matter of urgency."" Lagarde tipped her hat in favor of the administration's proposal of principal reductions, but said the problem is that ""the big boys and girls - Fannie and Freddie - have to be part of that equation.""

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Eleven AGs Send Letter Urging DeMarco to Reverse Course

Eleven state attorneys general sent a letter to Edward DeMarco, Acting Director of the FHFA, urging him to allow Fannie Mae and Freddie Mac to move forward with principal reductions. Headlined by Massachusetts Attorney General Martha Coakley, the letter doubled down on the FHFA to ""preserve assets and prevent unnecessary foreclosures by implementing loan modifications that include principal write-downs."" State attorneys general said that new reductions ""should consider all of a borrower's debts, not just the monthly mortgage debt, be uniform, transparent, and publicly disclosed.""

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SIGTARP: Hardest Hit Spent 3% of Budget, Program Lacks Participants

As of December 31, 2011, the Hardest Hit Fund (HHF), which is meant to fund innovative measures to help families through the housing crises in hardest hit states, has spent just 3 percent of its budget since its February 2010 inception, a report published by a watchdog organization for taxpayers revealed Thursday. More specifically, as of the end of 2011, HHF spent $217.4 million of the $7.6 billion available for the program, and has provided assistance to just 30,640 homeowners, which is about 7 percent of the 458,632 to 486,536 homeowners it is estimated to help over the life of the program, which ends in 2017.

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Big Numbers Still Don’t Sway DeMarco Towards Principal Reduction

While arguments continue to be made that Fannie Mae and Freddie Mac should apply principal reductions to keep underwater borrowers from going into foreclosure, Edward DeMarco, FHFA acting director, still has plenty of ammo to defend his highly criticized stance. During a speech at the Brookings Institution Tuesday, DeMarco, despite revealing figures that showed the GSEs could potentially save $1.7 billion through the application of principal reduction, still cited reasons to be wary of the proposed foreclosure prevention solution.

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