Is Mortgage Principal Write-Off Overdue At Fannie, Freddie?

Taxpayers are on the hook for about $300 billion for Fannie Mae and Freddie Mac, but if liberals get their way, that number will balloon as Fannie and Freddie write-down mortgage principle for their most inept borrowers.

People would who made bad decisions should be subsidized by those who made wise decisions. That’s the typical left-wing approach to social problems such as the flood of foreclosures in America.

Here’s the liberal argument from the Huffington Post:

There’s a growing consensus among economists, investors, academics, and consumer advocates that more “principal reduction” — writing off a portion of a mortgage that exceeds a home’s value in exchange for a higher likelihood of repayment — can help avoid another wave of costly and economy-crushing foreclosures. That’s good for homeowners and lenders, and because millions of underwater mortgages are controlled by the government, it’s also good public policy.

But the country’s two biggest mortgage companies are not convinced, according to Edward DeMarco, acting director of the Federal Housing Finance Agency — which oversees the government-controlled mortgage giants Fannie Mae and Freddie Mac.

“Both [Fannie and Freddie] have been reviewing principal forgiveness alternatives and both have advised me that they do not believe it is in the best interest of the companies to do so,” DeMarco told Congress last week. He added that principal reduction is inconsistent with his mandate to protect taxpayers, who have invested more than $150 billion in the companies since 2008.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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