GSE’s Fighting Principal Reduction

In November, the House Committee on Oversight and Government Reform formally requested that Federal Housing Finance Agency (FHFA) answer specific questions on principal reduction for government owned or secured loans.   The current FHFA Director Edward J. DeMarco responded late week.   In short, there was no question that the agency does not feel that principal reduction will benefit taxpayers.  The FHFA feels, in short, that its’ role as overseer of the GSE’s prevent it from not only authorizing these reductions but advocating them as well.   The belief is that reductions will ultimately harm the portfolio that it manages.  The consensus in the agency is that current Federal rules in place for borrowers (like HARP and HAMP) are sufficient to address the issues facing borrowers.   In short, don’t expect the GSE’s to embrace principal reduction now or anytime soon.