Dear NACBA Member,
I am pleased to report that NACBA’s “principal paydown plan,” designed to help struggling homeowners in chapter 13 save their homes from foreclosure, is now under serious consideration by the Federal Housing Finance Agency (FHFA), as evidenced in the news release below. This is the result of work over the past year by the NACBA Board, Legislative Committee and individual NACBA members to explain and build support for this plan among lawmakers, policymakers in the various federal agencies and the White House, and with consumer, housing and other allies. The concept of the principal paydown plan grew out of the recognition that it would not be possible to get legislation adopted that would address the continuing foreclosure crisis and that instead we would need a solution that could be implemented outside of the legislative arena.
We greatly appreciate the support and work on this from key members of Congress, including Representatives Cummings, Lofgren and Conyers, among so many others. Likewise, we appreciate the efforts of so many NACBA members who traveled to Washington to meet with their Members of Congress to discuss this and other bankruptcy-related issues or who met with their congressional delegation in the district office.
We will continue to keep you up to date on new developments on this issue.
NACBA Legislative Chair
UNITED STATES CONGRESS
For Immediate Release
October 26, 2011
FHFA Director Praises Principal Paydown Plan as “Promising” and “Credible”
Pledges to Provide Members an Assessment in Two Weeks
Washington, DC (Oct. 26, 2011)—During a meeting today with 19 Members of Congress, Edward DeMarco, the Acting Director of the Federal Housing Finance Agency (FHFA), praised a principal reduction proposal by Rep. Zoe Lofgren and pledged to provide an assessment within two weeks of how it could be implemented.
Rep. Elijah E. Cummings, the Ranking Member of the House Committee on Oversight and Government Reform, hosted the meeting with Rep. Dennis Cardoza, Co-Chair of the Housing Stabilization Task Force, to discuss additional measures to address the foreclosure crisis.
Members lauded the latest move by FHFA. In response to DeMarco’s comments, Cummings said, “If Mr. DeMarco actually works with us to implement this proposal, it would be an important step to address this crisis, especially on the heels of his announcement Monday that he will implement the President’s plan to help responsible American homeowners refinance at today’s historically low rates.”
Rep. Lofgren stated, “I am encouraged that the Federal Housing Finance Agency is considering a plan similar to the one I’ve long advocated. Allowing homeowners to pay down the principal balances on their mortgages more rapidly in conjunction with Chapter 13 filings is a sensible solution. Linking this to the bankruptcy process will help those who truly need it and avoid the administrative failures that have plagued other modification initiatives. I believe this plan is entirely consistent with FHFA’s obligation to minimize taxpayer losses in Fannie Mae and Freddie Mac, and I look forward to Director DeMarco’s answer two weeks from now.”
Rep. Lofgen's proposal would allow homeowners in Chapter 13 bankruptcy to pay down loan principal and reduce negative equity during a five-year period with no interest. In exchange, homeowners would agree to settle claims against servicers, thereby avoiding litigation and reducing taxpayer liability.
During today’s meeting, Mr. DeMarco said his legal team had already begun reviewing the proposal. “Based on initial feedback,” he said, the proposal “has a lot of promise,” “strikes me as being responsible,” and appears to be a “credible way” to address the crisis while recognizing various interests in mortgaged properties. He committed to Members that he would provide a more detailed assessment of the proposal within two weeks.
Today’s meeting was a follow-up to a previous meeting Cummings and Cardoza hosted on10/6/11, during which Members pressed DeMarco to implement the President’s recent proposal to eliminate barriers faced by underwater homeowners seeking to refinance their mortgages at current market interest rates. DeMarco announced on Monday that FHFA would be taking several steps to reduce these barriers.
Cummings issued a release on Monday stating, “I commend the President for proposing this idea in his speech to Congress, and I thank Mr. DeMarco for listening to the concerns of Members and their constituents. The changes announced today will provide additional relief for middle-class Americans and an important boost for our economy. But we must not stop here. Economists warn that the housing crisis is ‘ground zero’ for the economy and jobs, and this is only one modest step towards addressing it.”