Posted on Tue, Feb. 28, 2012
last updated: February 28, 2012 06:45:59 AM
California Attorney General Kamala Harris on Monday called on mortgage giants Freddie Mac and Fannie Mae to temporarily suspend all foreclosure sales statewide.
In a letter to Federal Housing Finance Agency acting director Edward DeMarco, Harris said "a good-faith pause" is needed following the recent multi-state settlement with the nation's largest lenders over mortgage abuses.
Harris said the FHFA, which oversees Fannie Mae and Freddie Mac, should hold off on all foreclosure sales until the agency completes a proposed review of its policies on reducing some of the mortgage debts owed by struggling homeowners.
"As ground zero for this mortgage and foreclosure crisis, California's underwater homeowners deserve a straightforward analysis from FHFA whether a program of principal reduction by Fannie Mae and Freddie Mac will provide significant assistance to struggling homeowners as well as save precious taxpayers dollars," Harris said.
The 49-state settlement with the nation's five largest banks Bank of America Corp., Citigroup, Wells Fargo, Ally Financial and JP Morgan Chase provides $18 billion in benefits over three years for homeowners in California, one of the states hardest hit by the nation's foreclosure crisis.
The deal includes $12 billion in the form of principal reduction and short sales for struggling homeowners, which Harris and some economists say could help ease California's foreclosure crisis.
But government-controlled Fannie Mae and Freddie Mac have strongly opposed such debt-forgiveness plans, saying they will cost taxpayers tens of billions of dollars.
The two entities own or guarantee about 60 percent of all home loans in California.
An FHFA spokeswoman had no immediate comment.
Harris' letter comes after months of sparring between her office and the federal mortgage giants.
In December, Harris sued Fannie Mae and Freddie Mac to compel them to answer questions about their alleged role in California's housing meltdown.
She also has called for DeMarco to step aside over his response to the foreclosure crisis.
Consumer advocates commended Harris for continuing to push Fannie Mae and Freddie Mac. The agencies' reluctance to offer principal reductions means that multi-state settlement won't help the majority of struggling homeowners, they said.
"There's a large portion of homeowners who will not be covered by this settlement," said Tara Twomey, attorney with Boston-based National Consumer Law Center.
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