In a recent article in The New York Times by Shalia Dewan, she discusses how Arizona has allowed for debt reduction but two of the largest players in this whole fiasco, Freddie Mac and Fannie Mae, will not participate. It boggles the mind that the Government has given Freddie Mac and Fannie Mae pseudo government capabilities however, they act in direct contradiction to the government’s plan to reduce foreclosures and keep citizens, families in their homes.
Ms Dewan states that ” Home values have fallen so much in Arizona that almost half the people with mortgages there owe more than their homes are worth. So when federal money became available to help stem the tide of foreclosures, the state flagged that group for help.
If banks would forgive some of a homeowners’ mortgage debt, the state said it would pay half, up to $50,000 of a $100,000 loan reduction. Despite the generous terms, most banks balked.
Only three homeowners have been approved for debt reduction since the program began in September 2010. A major obstacle has been that the two largest mortgage guarantors, Fannie Mae and Freddie Mac, will not participate — in Arizona or elsewhere. No loans are eligible for the state’s program if they were bought and held or securitized by the two companies, which are now under government control and guarantee more than 70 percent of the country’s home loans.
“It is extremely difficult for the principal reduction program to be successful” when Fannie and Freddie opt out, said Shaun Rieve, a spokesman for the Arizona Department of Housing.”
The goverment must step in and take back control that they have given Freddie mac and Fannie mae and/or require that Freddie and Fannie particate in State’s/goverment’s debt reduction plan.