March 22, 2016

Watt says decision on principal reduction in 30 days

Federal Housing Finance Agency Director Mel Watt said today that he expects his agency to be able to say whether there is a "win-win" approach to principal reduction for underwater homeowners within the next 30 days.

This issue is being weighed with respect to mortgages handled by Fannie Mae and Freddie Mac. Watt didn't say he was for or against principal reduction, but he did say there are numerous, complex considerations.

"My objective, as I have said on numerous occasions, has been to determine whether we could find a ‘win-win' strategy employing principal reduction that would benefit both borrowers and the Enterprises," he said in a luncheon address before the policy group Women in Housing and Finance.

"Many have asked why it has taken so long to reach a conclusion," he continued. "The direct answer is that making this determination involves consideration of an extremely complicated set of factors. These factors include, among others, balancing the decreasing number of borrowers who are both underwater and seriously delinquent with the cost and significant operational complexity for the Enterprises and servicers to implement a principal reduction program."

NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt said the association remains committed in opposing principal reduction. "It is hard to envision a scenario where principal reduction would result in a win-win for the marketplace overall. NAFCU strongly supports protecting consumers, but principal reduction sets a dangerous precedent. Credit unions have a strong history to doing everything possible to keep members in their homes," Hunt said.