Wednesday, February 11, 2015

Would Help For Underwater Homeowners Cost Taxpayers?

The overseer of Fannie Mae and Freddie Mac wants to allow debt cuts for a narrow group of borrowers who owe more than their homes are worth. The trick is figuring out a way to do it without incurring costs for taxpayers.
Federal Housing Finance Agency Director Melvin Watt told reporters this week that he is studying the idea of reducing principal on properties with depressed values, a step backed by some housing advocates and Democratic lawmakers.
Watt met with reporters for a broad discussion of his policies, which apply to the more than half of home loans backed by Fannie Mae (OTCBB:FNMA) and Freddie Mac (OTCBB:FMCC).
If the agency does decide to allow debt cuts for some borrowers, "I think it will be substantially narrower than the vision people have," Watt said. "Reducing everybody's principal would cost taxpayers billions."
About 5.1 million homeowners, one in ten of all homeowners with a mortgage, had negative equity in the third quarter of last year, according toCoreLogic (NYSE:CLGX) data. The number has been declining as home prices have recovered. Congress could pass a tax break if lawmakers want to aid underwater borrowers, Watt said.
Read the rest of the story HERE.

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