During this morning’s Senate Banking Committee hearing, U.S. Sen. Elizabeth Warren (D-Mass.) made her opinion known that she believes Federal Housing Finance Agency Director Mel Watt is moving too slow on mortgage reform.
She bluntly asked Watt during the today’s hearing why he has not acted on a plan to help struggling homeowners lower the amount they owe on mortgages. Warren then cited studies she said showed reductions in loan principal could financially help borrowers and mortgage giants Fannie Mae and Freddie Mac.
"I’ve asked about this repeatedly and you said you’d look into allowing Fannie and Freddie to engage in principal reduction, you said it again today,” Warren said at a Senate Banking Committee hearing. She and Democratic Senator Robert Menendez pressed Watt on why the FHFA has yet to reach a decision on principal loan reduction for struggling homeowners.
She claimed that Watt hasn’t done anything to help homeowners who are underwater and facing foreclosure since he has been in office. “You’ve been in office for nearly a year now and you haven’t helped a single family, not even one, by agreeing to a principal reduction,” she continued. “I want to know why this has not been a priority for you."
“Five million families lost their homes during the financial crisis and millions more are still struggling and another 5.3 million homeowners remain underwater on their homes.,” she added, citing data from CoreLogic. “People are continuing to lose their homes every day in foreclosure.”
Watt replied, telling Warren that she was overstating his lack of attention to the policy calling it “a very difficult issue.” “The reason it is difficult is because we are looking for exactly what you said – a win-win situation,” he said. “We have to do this in a way that is responsible, otherwise we just reduce principal for everybody across the board…is not what anybody I think is advocating for, so then we have to decide what is a responsible way to do so.”
Watt added that he does not necessarily believe that having higher G-fees is the most part of bringing private capital back into the market. He added that he is more focused on providing certainty, and setting out a "transparent and rational basis" for setting G-fees. “This issue cannot be elevated over other matters that the FHFA is examining without a thorough analysis.”