WRONG
TURN
DeMarco, a career bureaucrat
who oversees the companies as
acting director of the Federal
Housing Finance Administration.
Former colleagues describe DeMarco as a politically conservative
housing policy wonk thrust due
to unusual circumstances into a
job that was supposed to be temporary, but has stretched on for
three years. In 2010, Senate Republicans spiked Obama’s choice
to appoint a permanent head to
the agency, the well-respected
former North Carolina banking
commissioner Joseph Smith. They
decided they like DeMarco running the show just fine.
In order to bring more pressure
to bear on DeMarco, in January
the Treasury Department announced that it would triple the
incentives it would pay for each
dollar of loan forgiveness offered
by investors.
An official familiar with the
internal debate over loan forgiveness said this move nearly forced
DeMarco to capitulate.
“DeMarco was getting constant
calls from Treasury and the White
House,” this official recalls. “It
was a full court press.”
Yet DeMarco ultimately refused
to yield. After months of signalling
HUFFINGTON
11.04.12
“SERVICERS HAVE
BEEN ALLOWED TO
RUN ROUGHSHOD
OVER HOMEOWNERS,
WITH NO CONSEQUENCES.”
his clear distaste at the thought of
debt forgiveness, DeMarco wrote
a letter to lawmakers at the end of
July restating his formal opposition.
It was the moral hazard, he said.
“This could give borrowers
who are current on their mortgages a message that the government endorses forgiving a portion
of mortgage debt if hardship can
be demonstrated, creating a very
broad incentive for underwater
borrowers to seek ways to become
eligible,” he wrote.
DeMarco has declined repeated
requests by Huffington magazine
for an interview, but supporters say
he just doesn’t think principal reduction would do much good, and
that he fears it could undermine the
confidence of the investors who buy
the loans that Fannie and Freddie