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F'EDERAL
IIOI]SING
I'II\ANCE
AGENCY
Office
of
the
Director
February
27,2012
The HonorableKamala
D. HarrisAttorney
GeneralState
of
California
1300
I
Street
Suite
1740Sacramento,
CA
95814Dear
Attorney
General
Harris:
Thank
youforyourFebruary
24fr
letter.
You
asked me
todirect
a suspension
of
foreclosures
in
Californiaof
delinquent loansowned
by
Fannie Mae
and
Freddie
Mac.
I
haveconsidered
your
requestand
my
answer
is
no.
Numerous foreclosureslowdowns
and
moratoria
have
already
taken
place,
each
adding
to
the
losses
shifted
toAmerican
taxpayers
and
furtherdestabilizing
neighborhoods.
Since
entering conservatorship,FannieMae
and
Freddie
Mac
havebeen leaders
in
loan
modifications
and
other foreclosure prevention
transactions.
Together,the
two
companies
have
undertakenmore
than
two
million
foreclosureavoidance transactions,
including
morethan
one
million
loan
modihcations.
More
than
85
percent
of
these
transactionsallowedthe homeowner
to
retain
homeownership.Moreover,
FannieMae
and
Freddie
Mac
havebeen
instrumental
as
theTreasury
Department'sfinancial
agents
in
developing
and
maintaining
the Home
Affordable
Modification
Program
(HAMP).
Recognizing
HAMP's
limitations,
the FederalHousingFinance
Agency
(FHFA)
together
with
the
two
companiesdeveloped theso-called
Standard
Modification,
which
we
introduced
last
year
as
partof
theServicing
Alignment
Initiative.
The
success
of
this
modification
programled the TreasuryDepartment
to
recently
expand
HAMP
to
includethe
Standard
Modification
in
the
HAMP
menu.
You
asked me
to
undertake
a
review ofprincipal
forgivenessyet you
know
that
FHFA
hasdone
this
analysis
on
three
differentoccasions.
FHFA's
decisions
iegarding principal
forgiveness
are
directly
in
line
with
our
responsibilities
and
authorities
as
conservator
and
conform
to
prior
actions
taken
to
determine
what formof
loss
mitigation
activities-such
as
HAMP,
the Home
Affordable
Refinance Program
(HARP),
unemploymentforbearance,
and
support
for
short
sale
and
other foreclosureavoidancedevices--
would
best meetthose
requirements.
In
our
view,
the
proper
measure
of
the
benefit
derived
from
reducing
a
borrower's
loan
balance
is not calculated
through
a
simplecomparison
ofprincipal
forgiveness
to
foreclosure;rather,the4007th
Street,
S.W,,
Washington,
D.C.20024
.
202-649-3801
.
202-649-1071
(fax)
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