FHFA Refused Proposed Principle Reduction Program for Underwater Borrowers

Date Published 8/9/2012
Author US Federal Housing Finance Agency
Country United States

The US Federal Housing Finance Agency, that regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks, issued the following statement:“Given our multiple responsibilities to conserve the assets of Fannie Mae and Freddie Mac, maximize assistance to homeowners to avoid foreclosures, and minimize the expense of such assistance to taxpayers, FHFA concluded that HAMP PRA [the Home Affordable Modification Program for underwater borrowers that includes a Principle Reduction Alternative] did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today.” It concluded that the costs and risks of the program outweigh the benefits. The economic analysis is detailed in the related report. [Link to full report]

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