Treasury wants mortgage principal reductions on taxpayers’ dime

TRD 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
New York Attorney General Letitia James and 63-36 99th Street in Rego Park (Getty; StreetEasy)

“Not on my watch”: AG Tish James fines developers who violated 421a

“Not on my watch”: AG Tish James fines developers who violated 421a
902 Drew Street and 400 East 58th Street (Google Maps)

New York’s multifamily sales improve in Q3

New York’s multifamily sales improve in Q3
San Francisco Mayor London Breed (Getty)

San Francisco mayor blasts “lefty movement” for blocking housing

San Francisco mayor blasts “lefty movement” for blocking housing
Brooklyn Hospital Center at 121 DeKalb Avenue in Brooklyn (Credit: Google Maps)

Brooklyn Hospital Center’s $1B renovation could include 1K affordable units

Brooklyn Hospital Center’s $1B renovation could include 1K affordable units
Arker Companies principal Alex Arker and 51-19 Beach Channel Drive in Edgemere (Arker Companies; Google Maps)

Arker Companies begins massive redevelopment of former Queens hospital

Arker Companies begins massive redevelopment of former Queens hospital
Brooklyn’s Sunset Park is in the midst of a severe housing crisis and in desperate need of affordable housing. (Photo by Jim.henderson via Wikipedia)

Sunset Park faces severe affordable housing shortage: report

Sunset Park faces severe affordable housing shortage: report
arrow_forward_ios

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

Loading...