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DeMarco: Strategic Defaults Could Quickly Wipe Out Principal Forgiveness Gains

FHFA Director defends principal forgiveness math.

By Heather Anderson | Updated on April 12, 2012

If only 90,000 deeply underwater but current borrowers defaulted on their Fannie Mae and Freddie Mac-owned mortgages in an attempt to qualify for a principal forgiveness program, the financial benefits of the program would be eliminated. So said Federal Housing Financial Agency Director Edward DeMarco Tuesday during a controversial speech at the Brookings Institution that has set off a firestorm of controversy among lenders.

Ninety thousand pales in comparison to the approximately 2 million borrowers that could be eligible for a principal forgiveness modification from Fannie and Freddie, according to the speech, available on FHFA’s website.

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