No plan for principal reductions at Fannie Mae
by JACOB GAFFNEY
Friday, September 30th, 2011, 4:16 pm
The number of Americans struggling to make their mortgage payments is at traditional highs, while properties remain at high levels of negative equity.
Popular strategies for helping distressed borrowers include mortgage modification and refinancing, to name a few. But at the largest mortgage player in the nation, Fannie Mae, there is one option that the government-sponsored enterprise has no plans to use.
Michael Williams, the CEO of Fannie Mae, tells HousingWire magazine that the firm will not ask mortgage servicers to reduce the principal on distressed loans.
"We do not do principal reduction," Williams said. "When we look at the toolset that we bring to the table, we really look at the interest rate, term and then forbearance of principal but not forgiveness of principal."
Williams joins the CEO of Freddie Mac, Charles "Ed" Haldeman in the resolve to pursue loss mitigation strategies, such as mortgage modifications. Both men disclosed this information in separate interviews with HousingWire magazine.
In April, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to align guidelines for servicing delinquent mortgages.
Both CEOs refer to foreclosure as an option of last resort, something that is ultimately in the best interest of the American taxpayer, they say.
"We have found that majority of the borrowers that we are dealing with have a challenge in meeting their monthly payment," Williams said in reference to actions at Fannie Mae, "so what we want to do is put them in a modification that really gets them to a point where they can afford the payment."
Williams outlines his strategy in greater detail in the October issue of HousingWire magazine.