Sen. Elizabeth Warren (D-Mass.) said FHFA Director Mel Watt is moving too slowly to execute a plan to assist homeowners with principal reduction.
During a Senate Banking Housing and Urban Affairs Committee hearing Wednesday, Warren called principal reduction a win-win for Fannie and Freddie as well as families.
Warren said Watt is required by law to implement a plan that seeks to maximize assistance for homeowners and take advantage of programs that would minimize foreclosures.
"It has been six years since Congress created FHFA and in all of that time, your agency has never, not once, permitted a family to reduce its principal mortgage through Fannie or Freddie. I've asked about this repeatedly and you said you'd look into allowing Fannie and Freddie to engage in principal reduction, you said it again today," Warren said to Watt.
"You've been in office for nearly a year now and you haven't helped a single family, not even one, by agreeing to a principal reduction. I want to know why this has not been a priority for you. The data are there," she said.
Warren's assertion that principal reduction has not been a priority was probably an overstatement, Watt responded.
"It has been a priority, it's just been a very difficult issue," Watt said. "The reason it's difficult is because we are looking for exactly what you said, which is a win-win situation. So, we have to do this in a way that is responsible, otherwise we just reduce principal for everybody across the board and it's not what anybody is advocating for."
Warren said reports from the Treasury Department and the Congressional Budget Office show that Fannie and Freddie could be making money by reducing principal for homeowners.
"Every day that you delay, more families lose their homes," she said. "I want to know, when are you going to have an answer on this one?"
"It won't be as long as it has been, let me put it that way," Watt told Warren. "I can't take responsibility for what decisions were made in the last five years."
Under questioning from Sen. Pat Toomey (R-Pa.), Watt said a plan is going to be released early next year that addresses how Fannie Mae and Freddie Mac will set mortgage guarantee fees.
"We expect to provide a framework and the rational for it sometime during the first quarter of this coming year," Watt said.
In September, NAFCU and CUNA urged the FHFA to abandon its proposed increases to guarantee fees.
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