Today the companies are in a very different financial situation. Soon both Fannie and Freddie will have returned more money to taxpayers than they initially received in the bailout, meaning they can likely afford to meet their obligations. All they need is a regulator that requires them to do so.
4) Lift the FHFA's unnecessary ban on principal reductions: At the height of the foreclosure crisis, Fannie, Freddie and the FHFA were at the center of a heated debate over assistance to struggling homeowners. The focal point was so-called "principal reduction," where a lender or investor lowers the amount an underwater borrower owes on their mortgage to increase their chance of repayment. Today the FHFA bars Fannie and Freddie from reducing principal on the loans they own or guarantee, despite evidence that it would save the companies money and help hundreds of thousands of borrowers avoid foreclosure.
Foreclosure activity has declined markedly since this debate began, but more than 7 million homeowners are still underwater on their mortgages — many with loans owned by Fannie and Freddie — putting them at serious risk of foreclosure and stifling their spending elsewhere in the economy. According to recent analysis from the Congressional Budget Office, targeted principal reductions at Fannie and Freddie would reduce defaults and boost economic growth, all while saving taxpayer dollars.
With comprehensive housing reform unlikely to pass both houses of Congress any time soon, the confirmation of Mel Watt creates a remarkable opportunity to help millions of struggling families. Now it's time for the new FHFA director to get to work.
Andrew Jakabovics is the senior director for policy development and research at Enterprise Community Partners. John Griffith is a senior analyst at Enterprise Community Partners.