He is “America’s most dangerous man,” says Huffington Post’s Peter Goodman, inveighing against the head of the Federal Housing Finance Agency in a new column. “He is the number one obstacle to. . .helping the economy recover,”according to Ilyse Hogue, from Van Jones’ Rebuild the Dream. Together with key members of the Congressional Progressive Caucus and underwater homeowners, liberal advocates from Rebuild the Dream and other liberal advocacy groups delivered a petition with 85,000 signatures to the FHFA calling on President Obama to fire DeMarco.
What are DeMarco’s sins? Namely, refusing to support broad-scale principal reduction for mortgages held by Fannie Mae and Freddie Mac, which he oversees as chief of the independent agency. DeMarco’s dual mandate is to stabilize the housing market and to get the government-backed housing giants on better financial footing so they can ultimately be weaned from government. And the second goal has made DeMarco reluctant to support the upfront cost of mass principal reduction. It would cost $100 billion to write down all government-held underwater mortgages, which DeMarco has pointed to as evidence that principal forgiveness wouldn’t help mitigate losses.
Some on the left, however, believe that DeMarco’s fiscal concerns for Fannie and Freddie have held back the housing recovery. “He’s acting as if he was head of two private companies called Fannie and Freddie and not taking into account the impact this has on the economy, and I think he should be more cooperative with efforts to reduce foreclosures,” Rep. Barney Frank (D-MA) told the Hill. “If DeMarco were fire chief and your house became engulfed in flames, you could forget about calling 911,” blasted HufffPost’s Goodman. “He would not run up the municipal water bill by saving your block.”
They point out that under one proposal before the FHFA, the government would only provide partial principal forgiveness—not completely write down all underwater mortgages, as DeMarco suggested—which one Treasury official estimates would actually save the government about $28 billion as more homeowners would be able to pay their loans.
DeMarco’s FHFA acknowledges that there is a difference of opinion over the role of Fannie and Freddie in the recovery but says the agency is doing its part to help underwater homeowners. “There is a policy dispute about the best way for Fannie Mae and Freddie Mac to help troubled borrowers. FHFA’s view is that using tools other than principal reduction is doing more to keep people in their homes, without increasing taxpayer losses,” says Corinne Russell, an FHFA spokesperson.
In recent weeks, the Obama administration has expanded its efforts on housing, including an expansion of refinancing for homeowners with Fannie and Freddie mortgages and a pilot program to turn foreclosed homes into rentals. The $26 billion mortgage settlement also contained an average of $20,000 in principal reduction to homeowners, though a Brookings analyst believes only about 5 percent of underwater loans will qualify.
DeMarco’s opponents, among others, are likely to say that such steps aren’t enough. But the developments at the FHFA have gained broad praise from independent housing analysts, and they could take the edge off the movement on the left to oust him. What’s more, even some on the left who aren’t DeMarco boosters worry that the alternatives won’t be too different, as the Hill’s story points out—and that any more liberal alternative would get bogged down in the politics of the Senate appointment process.
Ezra and Brad profiled DeMarco here.