Attorneys General Press White House to Fire F.H.F.A. Chief

WASHINGTON — Prominent state attorneys general are calling on President Obama to fire the acting director of the Federal Housing Finance Agency and name a new permanent director, arguing that current policies are impeding the economic recovery.

Under its current leader, Edward J. DeMarco, the F.H.F.A., which oversees the bailed-out mortgage financiers Fannie Mae and Freddie Mac, has refused to put in place a White House proposal to reduce the principal on so-called underwater mortgages — a move that might prevent foreclosures and thus save the mortgage giants money, but also might expose taxpayers to additional losses.

Led by Eric T. Schneiderman of New York and Martha Coakley of Massachusetts, the attorneys general argue that writing down the principal on underwater mortgages — those where the outstanding mortgage is greater than the current value of the home — would aid the recovery. They note that write-downs were a central part of a multibillion-dollar mortgage settlement that 49 state attorneys general negotiated with five major banks a year ago. And they say the White House should name a director to take that action.

“Our nation’s economy will never fully recover until we address this foreclosure crisis,” Ms. Coakley said in a statement. “Fannie Mae and Freddie Mac have been an obstacle to progress for far too long, and it is time for new leadership and a new direction to ensure that homeowners receive this important relief.”

Mr. DeMarco has held the position at the head of the F.H.F.A for more than three years. In the last year, especially, he has clashed with the administration over the issue of write-downs, also called principal forgiveness.

The Treasury Department has argued that write-downs would save money by reducing the chances homeowners would default. An F.H.F.A. analysis released last year seemed to show that a carefully directed program could save Fannie and Freddie money. But Mr. DeMarco has rejected the idea on the grounds that it would expose taxpayers to more losses. Fannie and Freddie have already required tens of billions of dollars of taxpayer aid.

The administration has frequently criticized Mr. DeMarco’s decision. “F.H.F.A. is an independent federal agency, and I recognize that, as its acting director, you have the sole legal authority to make this decision,” Timothy F. Geithner, who stepped down as Treasury secretary in January, wrote Mr. DeMarco last year. “However, I do not believe it is the best decision for the country.”

Yet the White House has failed to replace Mr. DeMarco.

That decision has troubled some members of Congress. “Ensuring that F.H.F.A. implements Congressional directives to support the most liquid, efficient, competitive and resilient housing finance markets is a matter of national urgency,” said a letter to Mr. Obama signed by 45 members of the House last month. “We strongly urge you to nominate an F.H.F.A. director who is ready to fulfill this mission and address the many challenges still facing the nation’s housing finance markets.”

Some housing advocates suggest the White House has not named a new director in order to keep Mr. DeMarco as a scapegoat for what they perceive as a failed housing policy.

The administration has struggled to find a qualified person to take the job. There is speculation that the White House may finally be close to naming a director. The Wall Street Journal reported that officials were considering nominating Representative Mel Watt, Democrat of North Carolina, perhaps next month.

The White House declined to comment on personnel policy.

Any director would probably be named as a recess appointment because he or she would be unlikely to win Congressional approval. Many Republicans concerned about the cost of Fannie and Freddie to the taxpayer have said the two agencies should not adopt principal-reduction policies. In 2010, the White House nominated Joseph A. Smith Jr., a North Carolina banking commissioner, for the position, but his nomination died in the Senate.

Attorneys general who have signed the letter also include Kamala D. Harris of California, Beau Biden of Delaware, Lisa Madigan of Illinois, Douglas F. Gansler of Maryland, Catherine Cortez Masto of Nevada and Bob Ferguson of Washington.

Article source: http://www.nytimes.com/2013/03/18/business/economy/attorneys-general-press-white-house-to-fire-fhfa-chief.html?partner=rss&emc=rss