Attorney General Martha Coakley on Monday called for the removal of the federal chief regulator of mortgage giants Fannie Mae and Freddie Mac, saying he is blocking efforts that would help struggling homeowners avoid foreclosure.
Edward J. DeMarco, acting director of the Federal Housing Finance Agency, has drawn widespread criticism from housing advocates and members of Congress for refusing to support a program that would lower the debts of delinquent mortgage holders. Coakley will add her voice to the chorus on Tuesday, in a speech before a meeting of housing industry workers in Boston.
“The time has come for a permanent new replacement for director DeMarco,’’ Coakley said in an interview with the Globe. “Every day that goes by and we are unable to keep people in their homes when it is commercially reasonable is a huge loss.”
DeMarco’s office declined to comment. He was named interim chief of the agency in 2009, and stayed on in that capacity after President Obama’s pick as permanent head failed to get through Congress.
The Federal Housing Finance Agency oversees Fannie Mae and Freddie Mac, which the US government seized in 2008 when they were on the brink of collapse during the financial crisis. The two companies combined own or guarantee about three-quarters of all residential mortgages in the country.
Coakley said DeMarco is refusing to allow Freddie Mac and Fannie Mae to let borrowers who lost their homes to foreclosure, or who are at risk of losing their homes, buy them back at lower prices. The Federal Housing Finance Agency requires that sales of troubled homes be “arm’s length,” meaning they can’t be sold back to the original borrowers. Agency officials have said the provision is meant to prevent fraud.
On Monday, Coakley’s office sent a letter to the agency, saying it was “troubled” by federal policies that “appear to violate provisions of the new Massachusetts law to prevent unlawful and unnecessary foreclosures.” That Massachusetts law requires lenders to help certain troubled borrowers save their homes if it makes more economic sense than a foreclosure.