Reed Commends FHFA for Principal Reduction Announcement
Senator Reed has long advocated using responsible principal reduction to prevent foreclosures and offer relief to struggling homeowners
WASHINGTON, DC -- Today, after the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will offer principal reduction to eligible, seriously delinquent underwater borrowers affected by the financial crisis to avoid foreclosure, U.S. Senator Jack Reed (D-RI) praised the decision.
“I am pleased that FHFA, under Director Watt’s leadership, has finally chosen to give families still struggling from the wake of the financial crisis one more chance to save their homes,” said Reed, a senior member of the Banking, Housing, and Urban Affairs Committee. “I commend FHFA for carefully analyzing this issue, which included efforts to ensure this program is also consistent with the statutory mandate to preserve and conserve the assets of the enterprises. This decision is long overdue and offers meaningful foreclosure relief to hundreds of families in Rhode Island and tens of thousands more nationwide.”
According to FHFA guidelines, borrowers must qualify for the program by meeting specific criteria, which include:
- Must be owner-occupants.
- Must be at least 90 days delinquet as of March 1, 2016.
- Have an unpaid principal balance of $250,000 or less.
- Have a mark-to-market loan-to-value ratio of more than 115% after capitalization.
In 2012, Senator Reed gave a speech on the Senate floor noting that:
“There are people in this Chamber on both sides of the aisle who say we have to run this government more like a business. Well, guess what? The businesses are using principal reduction, and FHFA is saying they can't do PRA. This is shortsighted and it is wrong. I urge the FHFA to reconsider and, in the meanwhile, I am going to continue my efforts to do what I can do to help these homeowners who are facing foreclosure.
“It is very difficult--and I know it is for my colleague from New Hampshire and my colleague from Utah--to go back home and see a homeowner who is struggling with a mortgage that might be 5 percent or 6 percent, knowing that banks can borrow at less than 1 percent, and this homeowner has difficulty getting access to a better mortgage rate because he or she is underwater.
“I hope we adopt some of the smarter business practices around here and that FHFA leads the way, and I am going to do all I can to ensure that outcome becomes a reality.”