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March 24,2017 The Honorable Brad Miller U.S. House of Representatives ll27 Longworlh House Office Building Washington, DC 20515 Dear Congressman Miller: Thank you for your March 11,2011, letter regarding the Enterprises' participation in principal reduction programs. I understand and share your desire to minimize taxpayer losses from Fannie Mae and Freddie Mac, and I would like to provide the reasoning behind my decision regarding principal reduction programs.
FHFA has evaluated principal reduction programs such as the Federal Housing Administration's Short Refinance Program and Home Affordable Modification Program's Principal Reduction Alternative (HAMP PRA) in light of its conservatorship responsibilities and the Enterprises continued presence as long-term guarantors and investors in mortgages. These programs may fĂŹt the needs of certain mortgage investors and may reduce foreclosures. FHFA understands that some mortgage investors have sought such solutions in order to recover today what principal they can on outstanding mortgages. However, I have determined that these programs as they work today, while they may be in the best interest of certain other mortgage investors, do not meet FHFA's conseryatorship goals.
FHFA and the Enterprises conducted significant analysis to evaluate participation in these programs, which I considered in making this determination. FHFA's decision was based on consideration of the potential benefits and costs to the Enterprises, which ultirnately irnpact taxpayers through the financial support agreements with the Treasury Department.
FHFA found that only a very small proportion of Enterprise loans would be candidates for principal reduction programs. Using FHFA's House Price Index to evaluate current market values, the agency found that less than ten percent ofborrowers with Enterprise loans have negative equity in their homes. Of these loans more than half are perfonning and thus not eligible for the HAMP PRA program or modification under the Enterprise securitization trust agreements. For performing loans, we anticipate many underwater Enterprise borrowers will remain current on their loans and honor their financial commitment. As noted below, providing refinance opportunities for these borrowers helps borrowers in achieving that outcome.
1700 G Street, N.W., Washington,D.C.20552-0003
. 202-414-3800 . 202-414-3823 (fax)