Homeowners, neighborhood leaders and the nonprofit group Empowering and Strengthening Ohio's People, better known as ESOP, launched a campaign urging federal officials, banks and mortage companies to save homes from foreclosure.
Community members delivered letters to bank branches across the Cleveland area asking bank CEOs to support their demand that Ed DeMarco, acting director of Federal Housing Finance Agency, end his opposition to principal reduction. Principal reduction could save homes from foreclosure.
The idea behind principal reduction is that banks would reduce the principal on the mortgages of struggling homeowners. DeMarco opposes principal reductions, instead favoring principal forebearance, where a few payments are forgiven, but the underlying debt remains. Some critics of prinicipal reduction fear it would encourage homeowners to default just to get their principals reduced. Local residents disagree.
“Ed DeMarco’s policies at FHFA have continued to hurt our community,” homeowner Anita Gardner said. “He is responsible for the vacant houses and crime in our neighborhood and it’s time that he is held responsible for his policies.”
“The federal government bailed out the banks but left homeowners high and dry,” homeowner Marvetta Rutherford added.
Nearly one in four homes across the nation is underwater, meaning homeowners owe more on their mortgage than the current market value of their home. That is called negative equity and it is a problem not only for borrowers facing foreclosure, but it continues to be a drag on the housing market and overall economy.
However, principal reduction is rarely used. The FHFA refuses to allow principal reduction for mortgages backed by Fannie Mae and Freddie Mac, the two largest sources of U.S. mortgage finance. Along with the Federal Housing Administration, they provide the funds for 90 percent of all new mortgages.
“Homeowners keep losing their homes, falling further and further behind with no hope of regaining the equity in their homes. Meanwhile Ed DeMarco refuses to allow Fannie Mae and Freddie Mac to use principal reduction,” said Mark Seifert, executive director of Empowering and Strengthening Ohio’s People.
Recently members of Congress cited several reasons supporting principal reduction and requested that DeMarco justify his refusal to implement a program.
“If Ed DeMarco won’t listen to Congress, economists or homeowners who all say we need principal reduction,” Seifert said, ”then maybe he’ll listen to the people he really seems concerned about: the banks. We want bank executives to tell DeMarco to use principal reduction.”
Principal reduction will help homeowners, taxpayers and the overall economy. Now homeowners are demanding that DeMarco do what is necessary to help end the housing crisis.
Article courtesy of James Rudyk, director of community organizing at East Side Organizing Project (ESOP)/Empowering & Strengthening Ohio's People (ESOP).