Dear Mr. President, Speaker Boehner, and Leaders Cantor, Pelosi, Reid, and McConnell:
We are writing to urge you to include in legislation addressing the so-called “fiscal cliff" provisions that will provide assistance to homeowners who are currently underwater on their mortgages, including provisions that will provide principal reduction modifications to borrowers with loans guaranteed by Fannie Mae and Freddie Mac.
The Board of Governors of the Federal Reserve reports that the decline in home prices following the 2008 financial crisis may have destroyed approximately $7 trillion in household wealth in this nation. Although the housing market is slowly recovering, Federal Reserve Chairman Ben Bernanke warned in a speech last month that “the housing revival still faces significant obstacles," and “[t]he degree to which that challenge is met will help determine the strength and sustainability of the economic recovery."
Among the most serious challenges confronting the housing market and our nation is the number of borrowers who still owe more on their mortgages than their homes are worth. According to a report released in September by CoreLogic, 10.8 million homes in the United States-22.3% of all mortgaged residential properties-were still underwater at the end of the second quarter of this year.
In July, the Federal Housing Finance Agency (FHFA), the conservator and regulator of Fannie Mae and Freddie Mac, released a study showing that offering principal reduction modifications under the Making Home Affordable-Principal Reduction Alternative program to borrowers with loans backed by Fannie Mae and Freddie Mac could help as many as half a million homeowners and save Fannie Mae and Freddie Mac as much as $3.6 billion. Such a program was estimated by FHFA to be likely to yield a net savings of up to $1 billion to U.S. taxpayers.
According to Treasury Secretary Timothy Geithner, such a principal reduction program “would provide much needed help to a significant number of troubled homeowners, help repair the nation’s housing market, and result in a net benefit to taxpayers."
Given the clear benefits of providing assistance to underwater borrowers, as well as the significant savings for the American taxpayers, we believe that provisions expanding such assistance should be part of any deal to resolve the fiscal cliff. At a minimum, such legislation should require that Fannie Mae and Freddie Mac offer principal reduction loan modifications to borrowers who are net present value positive.
Thank you for your consideration of this request.
Sincerely,
[Signatories are listed above.]
