Treasury wants mortgage principal reductions on taxpayers’ dime

New York /
Jan.January 31, 2012 09:00 AM

Despite opposition from much of the financial industry, the U.S. Treasury Department forged ahead with a plan to offer American homeowners principal reductions on their mortgages, CNBC reported.

In a major expansion announced late last week of its Home Affordable Modification Program, the Treasury will increase incentives to lenders who offer principal reductions, paying up to 63 cents on the dollar for those reductions. It also opened up the option to Fannie Mae and Freddie Mac.

The money would come from taxpayer contributions to TARP funds. These measures come in addition to the principal forbearance and easier refinancing policies President Barack Obama outlined in his State of the Union address.

“Clearly the initial program erred on the side of making sure taxpayers were protected, but it didn’t do enough to help the overall economy,” said Michael Barr, former assistant Treasury Secretary for Financial Institutions and one of HAMP’s original architects.

CNBC said the TARP-funded principal reductions were a direct response to Federal Housing Finance Agency Director Ed DeMarco’s arguments against that such measures would cost the government-supported lenders $4 billion. Now that the Treasury has found funding for the moves though, it is forcing DeMarco’s hand. CNBC sources speculated that if DeMarco continues to hold Freddie and Fannie out of the program, the Obama administration could be emboldened to replace him. [CNBC]


Related Articles

arrow_forward_ios
A rendering of 165 Broome Street (Credit: Handel Architects)
Nonprofit plans affordable housing development near Essex Crossing
Nonprofit plans affordable housing development near Essex Crossing
All Falls Down: Kanye West’s “Star Wars”-themed affordable housing plan hits snag
All Falls Down: Kanye West’s “Star Wars”-themed affordable housing plan hits snag
All Falls Down: Kanye West’s “Star Wars”-themed affordable housing plan hits snag
(iStock)
Landlords seek up to 5% rent hike on stabilized apartments
Landlords seek up to 5% rent hike on stabilized apartments
Andrew Yang (Getty)
Does Andrew Yang’s housing plan make sense?
Does Andrew Yang’s housing plan make sense?
The Altana Complex and Waterford CEO John Drachman (Waterford)
Waterford Property venture acquires luxury rental complex from Carmel Partners
Waterford Property venture acquires luxury rental complex from Carmel Partners
Inside the quest to change single-family zoning
Inside the quest to change single-family zoning
Inside the quest to change single-family zoning
Dianne Morales and Phipps Houses in Kips Bay (Dianne Morales, Google Maps)
Mayoral candidate runs away from ex-employer Phipps Houses
Mayoral candidate runs away from ex-employer Phipps Houses
Freddie Mac’s economists said the slowdown will be caused by a hike in mortgage rates and limits on housing supply. (iStock)
Fannie, Freddie say housing market could see slight hiccup
Fannie, Freddie say housing market could see slight hiccup
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...