Go Back

Plot Thickens on Mortgage Write-Down Debate

WSJ Blogs

By Alan Zibel and Nick Timiraos

Fannie Mae conducted small tests to forgive debts of homeowners who owed more on their mortgages than the properties were worth in 2010. But the mortgage-finance company didn’t expand the pilot programs after concluding the programs were difficult to operate and the benefits weren’t clear, according to a letter from the firms’ federal regulator.

The letter, released Tuesday, disclosed that Fannie developed pilot loan write-down programs with Citigroup Inc. and Wells Fargo & Co. in 2009 and 2010 but they either didn’t launch or barely got off the ground.

Fannie’s loan-forgiveness pilot programs, “to the extent they were begun, ended due to complex operational issues involving system changes, accounting considerations and the interest level of Fannie Mae’s partners,” Alfred Pollard, the Federal Housing Finance Agency’s general counsel, wrote in a letter to Reps. Elijah Cummings (D., Md.) and John Tierney (D., Mass.).

...Wells Fargo’s program got further along, with several hundred borrowers receiving write-downs. But it had data-entry problems, as Fannie Mae’s software system doesn’t allow for principal write-downs, Mr. Pollard’s letter said. In addition, some 200 borrowers who received write-downs performed no better than those who didn’t.

Citi’s pilot program, which was never launched, included a “shared equity” component that would have allowed Fannie and Citi to share in future home-price gains for homeowners who received principal forgiveness. Fannie officials determined in mid-2010 that it wouldn’t be able to launch the program until spring 2011 due to operational concerns, according to company emails obtained by the lawmakers.

Click Here to Read More

© 2006 - 2018. All Rights Reserved.