Three Massachusetts congressmen today are urging federal housing officials to do more to help troubled homeowners avoid foreclosure -- adding pressure on mortgage giants Fannie Mae and Freddie Mac to reverse a prohibition against reducing the size of struggling borrowers’ mortgage loans.
In a letter released today, US Representatives Barney Frank of Newton; Michael Capuano of Somerville; and Stephen Lynch of South Boston, all Democrats, urged the head of the Federal Housing and Finance Agency to help homeowners and the economy. The agency was created in 2008 to regulate the mortgage giants that were seized by the government during the country’s financial crisis.
The congressmen were endorsing a request filed last week by Massachusetts Attorney General Martha Coakley. Coakley wrote to Edward DeMarco, acting director of the Federal Housing Finance Agency, asking him to write-down mortgage principal to avoid “unnecessary foreclosures.”
Federal officials said they had received both letters and would “respond soon.”
DeMarco has said that reducing mortgage debt for homeowners would be a burden to taxpayers, who already have paid billions of dollars to support the mortgage companies. Instead, he said, the agency believes that a process called “forbearance - through which the lenders set aside a portion of the mortgage interest-free -- also serves to reduce mortgage payments without financial losses to taxpayers.
The Massachusetts congressmen, all members of the Housing Financial Services Committee, said taxpayers already are suffering a financial burden because of the staggering economy. They said Demarco has authority under law to heed Coakley’s request.
“Taxpayers are not only not protected, but they are exposed to further problems when efforts that could enhance the pace of economic recovery are opposed as they have been by your agency,” the lawmakers wrote. “We believe that the Attorney General of our state has made a very strong case, and we urge you as strongly as we can to comply with her requests.”