Still Not Deleveraging American Homeowners

The Federal Housing Finance Agency has finally announced a program to reduce principal balances of distressed home mortgages held by Fannie Mae and Freddie Mac, eight years into the foreclosure crisis. Too little, too late would be an understatement to describe this initiative. According to the agency’s announcement, they expect about 33,000 homeowners to be eligible to have their mortgage debt reduced to the value of their homes. According to the Zillow negative equity report, more than 6 million homeowners have mortgage debt exceeding their home value, and almost a third of all homeowners are effectively underwater, meaning that their equity is less than 20% of the home value, making it difficult to sell or refinance.

Aggregate value of homes in the US rose from $10.9 trillion in 1998 to $28.3 trillion in 2006, then declined to $19.5 by the beginning of 2012, recovering somewhat in the past three years. This one-third decline in home values was not accompanied by a one-third decline in mortgage debt. Residential mortgage debt peaked at 10.6 trillion in 2006, and then declined to 9.5 trillion by the end of 2012, just a 10% easing. The overhang of home mortgage debt remains a huge impediment to consumer spending, wealth accumulation and the closing of the racial wealth gap in the United States. It is regrettable that the FHFA continues to take such a narrow view of its role as the regulator of our secondary mortgage market utilities and fails to pursue the social values that our taxpayer-backed housing finance system ought to advance.

Comments

[Karen Montez]

Is there a program to help people get their homes back after losing it through foreclosure fraud or outright stealing?

[Pat]

So it's gonna help a whopping 33,000 homeowners though an estimated 6 million are underwater? What a waste. Why even create such a stupid program that will help so few people? Our government is run by such morons. Even announcing it is ridiculous. I can't imagine how the 33,000 will be weeded out and found out of the 6 million. What kind of frightening criteria was set in order to narrow the eligible group to only 33,000? Why even spend the time? I hate this country and detest the government. Nothing great here and not even the Donald can make it great. People in Washington only care about themselves.

[Knute Rife]

In a world where Andy Sorkin gets to use his Dealbook platform to uncritically praise a judge who basically just carried water for the rabid neolibs in the MetLife case, this latest nonprogram for distressed buyers should come as no surprise.

[Richard Davet]

Proof that FHFA is playing a role in perpetuation of "The GSE Business Model". Changing hats as the wind blows.