HUD secretary supports mortgage writedowns

Now that the Department of the Treasury has said it would share the costs of mortgage writedowns with Fannie Mae and Freddie Mac, the Department of Housing and Urban Development claims it may be their legal responsibility to approve such action, the Wall Street Journal reports.

Now that the Department of the Treasury has said it would share the costs of mortgage writedowns with Fannie Mae and Freddie Mac, the Department of Housing and Urban Development claims it may be their legal responsibility to approve such action, the Wall Street Journal reports.

According to the newspaper, HUD secretary Shaun Donovan said that the rapid rate of home price declines coupled with a slow recovery has painted a significant number of borrowers into a financial corner and unless they are granted a mortgage writedown, many of them will likely default on their home loans.

In response to some critics who say that implementing a mortgage writedown for underwater homeowners will result in many of them strategically defaulting so they can capitalize on such a program, Donovan said this was not a concern to him, since many borrowers don't operate in that manner. 

Meanwhile, Federal Housing Finance Agency acting director Edward DeMarco continues to stand opposed to a program that would allow principal forgiveness, claiming that there a currently a number of initiatives, such as the Home Affordable Modification Program and Home Affordable Refinance Program, that could help many borrowers saddled with negative equity.



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