FHFA Director Ed Demarco Ignores Reality of Last Three Years; Over 3 Million Homes Under the GSEs Have Gone Into Foreclosure Nationwide
CLEVELAND, OH – Empowering and Strengthening Ohio’s People (ESOP), an Ohio-based homeowner advocacy organization, announced today that, after analysis of GSE and Federal Housing Finance Agency data, it is clear that inaction by the FHFA on a 2009 pilot program around principal reduction has likely resulted in hundreds of thousands of underwater homeowners unnecessarily losing their homes to foreclosure.
“While FHFA Director Ed DeMarco counts beans, the catastrophic human and economic toll of the housing crisis mounts,” said Mark Seifert, the executive director of ESOP, the largest grassroots and foreclosure counseling group in the country. “Exactly how many more families must lose their homes?”
ESOP estimates that, had the FHFA implemented principal reduction programs back in 2009, the number of family homes saved would be well into the hundreds of thousands. This analysis is based on foreclosure filings by Fannie Mae and Freddie Mac, and FHFA studies of borrowers’ negative equity positions.
In the last three years, between June 2009 and March 2012, more than 3 million loans owned by Fannie Mae or Freddie Mac started into foreclosure. FHFA figures suggest that over 1 million of those were underwater homeowners. In a January letter to Congress, DeMarco included a table that showed nearly 1.2 million homes in the GSE portfolio as seriously delinquent or in foreclosure – and that close to 40 percent of them were underwater by more than a 105 percent loan-to-value ratio. The GSE foreclosure actions, therefore, should reflect the same negative equity percentages.
ESOP’s analysis and extrapolations show that a large proportion of the 1 million underwater foreclosures (40 percent of 3 million total filings) could have been avoided with a principal reduction as part of the loan modification. Principal reduction is not a cure all, and many negative equity households aren’t always good candidates for loan modification. Yet, through years of experience assisting thousands of homeowners across Ohio, ESOP knows that many of those hundreds of thousands of upside down families in the GSE portfolio could have stayed in their homes had they been offered a principal reduction.
“Preventing foreclosure is ESOP’s top priority,” Seifert said. “Mr. DeMarco needs to understand this problem from the perspective of our communities – that every home saved means innumerable and collateral benefits for our neighborhoods, taxpayers, investors and our economy.”
“Principal reduction has garnered broad and bipartisan support in Congress, from federal and state agencies, and from large private banks which already have implemented programs with great success,” Seifert said. “It is time for the GSEs to accept principal reduction and implement it in a way that benefits homeowners and communities and keeps more families in their homes.”