NEW: Whitehouse Urges Mortgage Regulator to Adopt New Approach to Foreclosure Crisis
Friday, October 12, 2012
Last week, Rhode Island Federal District Court-appointed Special Master Merrill Sherman filed a report on Rhode Island’s foreclosure crisis in which she argued for debt forgiveness, or “principal reduction,” as a strategy to help families keep their homes. Today, U.S. Senator Sheldon Whitehouse (D-RI) forwarded Sherman’s report to the federal regulator for Fannie Mae and Freddie Mac, Edward DeMarco of the Federal Housing Finance Agency (FHFA), along with a letter endorsing the report’s suggestions and calling on the agencies to grant mortgage modifications with principal reductions.
While homeowners with mortgages not backed by Fannie Mae or Freddie Mac have been able to get economically-viable modifications, the FHFA’s refusal to permit principal reductions has limited the value of the federal government’s Home Affordable Modification Program (HAMP) for thousands of Rhode Island families struggling to keep their homes.
“The cases Ms. Sherman describes mirror the ones that constituents have brought to my attention, and I fully endorse her call for principal reductions,” Whitehouse wrote. “I hope that after reading Ms. Sherman’s report you will reconsider your opposition to principal reductions and recognize that supporting mortgage modifications makes economic sense for the homeowners and economic sense for our struggling housing recovery.”
Throughout his time in the Senate, Whitehouse has consistently supported principal reduction strategies as a way to prevent foreclosures. He has held hearings on, and introduced legislation to support efforts in Rhode Island to bring together homeowners and lenders in “mortgage mediation” sessions that can lead to loan modifications. He has also cosponsored legislation that would have allowed bankruptcy court judges to modify mortgages for homeowners going through the bankruptcy process.
Rhode Island’s foreclosure rate is currently the highest in New England and among the highest in the country. In addition to advocating for principal reduction, Senator Whitehouse has also worked with the state’s Congressional delegation to secure nearly $80 million in Federal Hardest Hit Fund money, which so far has helped over 1,600 homeowners avoid foreclosure.
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