WASHINGTON (Reuters) - Fannie Mae’s and Freddie Mac’s regulator on Saturday rejected criticism he was obstructing a housing recovery by taking too narrow a view of his mission to protect the financial health of the two massive, taxpayer-supported mortgage firms.
Edward DeMarco, acting director of the Federal Housing Finance Agency, argued the $141 billion in taxpayer funds Fannie Mae and Freddie Mac had received since they were seized by the government in 2008 were meant to get the companies back on their feet, not to provide “broad relief” to the housing market.
“FHFA has been aggressively trying to assist the housing market to ensure that the country continues to have a liquid and stable and functioning secondary mortgage market,” DeMarco said in an interview with C-SPAN public affairs television that was set to air on Sunday.
“Some of those things that are being advocated for us to do really go beyond what Congress has given us the authority to do and the funds that have been provided,” he said.
Fannie Mae and Freddie Mac, the two largest sources of U.S. mortgage finance, were placed in government conservatorship in September 2008 as mortgage losses skyrocketed. Along with the Federal Housing Administration, they provide the funds for 90 percent of all new mortgages.
Some Democratic lawmakers and former Obama administration officials have taken aim at DeMarco’s position on the mandate of the two government-sponsored enterprises, or GSEs. They argue FHFA needs to do more to halt the record pace of foreclosures and cut loan balances for the estimated 11 million U.S. borrowers who owe more than their homes are worth.
Lawrence Summers, a former top economic adviser to President Barack Obama, said in a Reuters column last Sunday that DeMarco had “taken a narrow view of the public interest” in his efforts to protect Fannie Mae and Freddie Mac’s health.
“FHFA has not acted on its conservatorship mandate to insure that the GSEs act to stabilize the nation’s housing market, and taken no account of the reality that the narrow financial interest of the GSEs depends on a national housing recovery,” Summers wrote.
In the interview, DeMarco touted a new initiative by his agency to widen a federal program that offers mortgage aid to so-called underwater borrowers.
The effort — a retooling of the Home Affordable Refinance Program, or HARP — aims to make it easier for borrowers who hold loans backed by Fannie Mae and Freddie Mac to refinance.
“Mortgage rates came down, but there was a set of borrowers who were not able to refinance,” DeMarco said. “Given the changes we’ve made, we estimate that maybe at least we’re roughly doubling what we’ve already seen come through the program.”
When HARP was unveiled in March 2009, the Obama administration predicted it would help 5 million borrowers. But so far, fewer than 895,000 have refinanced through the program.
DeMarco defended the steps he had taken as being well within his “statutory authority” to oversee the two firms.
The regulator said he was now focusing on a way to sell foreclosed properties held by Fannie Mae and Freddie Mac to investors willing to convert them into rental properties. “We’re turning to this as the next priority,” DeMarco said.
But he stood firm against suggestions the regulator open the door to principal reductions on loans backed by Fannie Mae and Freddie Mac.
“On a stand-alone basis, principal forgiveness doesn’t accomplish our conservator mandate relative to the loan modifications tools and techniques that we have in place right now,” DeMarco said.
He said it was up to Congress and the administration to decide how to restore the housing market.
“That policy debate needs to take place and we need to await an act of Congress to give us clear direction on where we’re going forward and what the timeline for that is,” he said. “The longer this goes on, the harder it is for FHFA to know what to do.”
Editing by Tim Ahmann and Peter Cooney