Industry NewsMortgage

New Fannie, Freddie short-sale incentives akin to principal reductions

Commentary: Program gives underwater homeowners chance at fresh start without 'moral hazard'

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Could the new Fannie-Freddie program on short sales provide what are essentially mass principal reductions to homeowners who are underwater but current on their mortgage payments, and would like to sell and get a new start? Didn't Edward J. DeMarco, acting director of the Federal Housing Finance Agency, which oversees both agencies, rule out wide-ranging principal reductions on Fannie-Freddie loans just recently, despite intense pressure from congressional Democrats?Yes to both questions. Though the revised Fannie-Freddie rules on short sales weren't presented this way when they were unveiled last week, look at the facts:DeMarco himself has estimated that the two giant companies have a combined 4.63 million underwater loans in their portfolios, of which 80 percent are being paid on time. The new guidelines open the door to people like these -- the "good guys" who kept their loans current, despite depressing declines in the value of their houses. Since they weren't delinquent,...