STOCK MARKET WATCH -- Friday, 4 May 2012

[Demeter]

15. Fannie Mae had seen benefits to lowering some home loans, documents indicate

http://www.washingtonpost.com/business/economy/fannie-chief-withheld-documents-favoring-homeowner-loan-program-lawmakers-say/2012/05/01/gIQAupI7tT_story.html

Officials at government-backed mortgage giant Fannie Mae concluded years ago that the company could “reduce its losses substantially” by lowering loan amounts for some troubled borrowers, according to internal documents cited Tuesday by the top Democrat on the House oversight committee.

The new insights into Fannie Mae’s analyses about the potential benefits of so-called principal reduction surfaced in a letter from Rep. Elijah E. Cummings (D-Md.) to Edward J. DeMarco, the acting director of the independent agency that oversees Fannie Mae and Freddie Mac.

Since being appointed head of the Federal Housing Finance Agency (FHFA) in 2009, DeMarco has refused to allow Fannie and Freddie to write down loan balances, in part because he worries that some homeowners would stop paying their mortgages to get relief, ultimately costing taxpayers more money. He has been steadfast in his disapproval in recent months despite growing pressure from Obama administration officials and House Democrats to allow principal reductions.

In the letter, Cummings and another committee member, Rep. John F. Tierney (D-Mass.), cite documents provided by a former Fannie employee. They accuse DeMarco of withholding key documents from the oversight committee and of failing to mention Fannie’s findings during past testimony, in which DeMarco explained his reasons for opposing reductions in loan balances....