U.S. Secretary of the Treasury Timothy Geithner (right) told a subcommittee of the Senate Appropriations Committee March 28 that he believes officials at both Fannie Mae and Freddie Mac favor mortgage write-downs for underwater borrowers, despite resistance from the agencies' regulator, the Federal Housing Finance Agency, Bloomberg reported.
While the Obama administration has continued to pressure the FHFA to offer principal reductions, the agency’s Acting Director Edward J. DeMarco has persistently refused, explaining his contention that write-downs do not make economic sense for the two government-sponsored enterprises, Bloomberg reported. DeMarco noted that such an action could create a “moral hazard” where borrowers who are current on their mortgages would begin to strategically default.
At the end of 2011, 12.1 percent of mortgages were delinquent or in foreclosure, according to data from the Office of the Comptroller of the Currency. The mortgage delinquency rate was 12.4 percent in 2010.
Read the complete article at the Appraisal Institute