In the wake of the Federal Housing Finance Administration’s firm stance that it will not allow principal reductions for Fannie Mae and Freddie Mac borrowers, the Obama administration is now looking for new ways to encourage the use of unspent federal housing funds to ease borrowers’ financial pains, Bloomberg News reported.
Some states are using money from the Hardest Hit Fund, a $7.6 billion national aid program which has so far only spent $351 million of its funds, Bloomberg News said, to give debt relief to Fannie and Freddie borrowers. The difference with the money provided by Hardest Hit is that it is provided at no cost to the government sponsored entities, according to Bloomberg.
The FHFA, which had barred principal reductions at the behest of controversial acting head Edward DeMarco, has approved the plan to use Hardest Hit funds.
“Treasury has money that is meant to help homeowners, and the money has not gotten out the door,” Julia Gordon, director of housing finance and policy at the Center for American Progress, said in a recent report cited by Bloomberg. “DeMarco has not seen fit to agree to do it one way, but that money should be spent to help homeowners, and if it means offering the money in a different amount or a different format, that should be done.” [Bloomberg News]