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May 9th, 2013

Principal reductions, settlement checks, a profitable Fannie



Are principal reductions just around the corner?

Buying justice macroThe appointment of Rep. Mel Watt, D-N.C., to head of the Federal Housing Finance Agency, the overseer of Fannie Mae and Freddie Mac, could have a substantial impact on the Home Affordable Modification Program (HAMP).

Rep. Watt supports principal reductions, or at least he has supported them in the past. Acting head of the FHFA, Ed DeMarco, has been mostly opposed to principal reductions, causing some to call for his job.

While some lawmakers say principal reductions will save taxpayers money in the long run, it’s hard to argue against the fact that principal reductions will require taxpayers to pony up big time over the short term.

In an interview, Rep. Watt said he’s not sure what his stance would be regarding principal reductions, saying he was “in a different position at that time” he signed his support for principal reductions.

“I was a member of Congress advocating for a different constituency with a different set of responsibilities,” he said in a recent interview. “My responsibility as a director would be to evaluate all of the information and make a sound decision. It could very well lead me to the same conclusion that the existing acting director has reached. Again, we don’t even know the issue will continue to be timely.”

More money coming to Goldman, Morgan Stanley customers

If you’re one of the 96,000 borrowers whose mortgage was serviced by Goldman Sachs or Morgan Stanley and you already received a check as part of the national mortgage settlement, you might have noticed the check was a little light.

If so, you’re correct. The independent firm responsible for handling the Independent Foreclosure Review payments, Rust Consulting, made an error when they mailed out checks last week. Both the Federal Reserve and Rust Consulting have acknowledged the error. Rust Consulting says additional checks will be mailed to Goldman and Morgan Stanley customers on May 17.

For a full list of the correct total payments, click here.

Fannie sends more money to the Treasury

Speaking of checks, Fannie Mae announced Thursday it will be sending $59.4 billion to the Treasury Department as they continue to pay back approximately $116 billion they received since 2008 when they entered into conservatorship.

Reuters reports that by the end of June, “Fannie Mae will have paid $95 billion in dividends to Treasury for the government’s stake, leaving the net cost of its bailout at about $21 billion.”

There has been a lot of talk recently about how Fannie Mae and Freddie Mac will transition away from full government control. While, there are proponents for each side, the return to profitability will certainly leave some to say, “If it’s not broke, don’t fix it.”

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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