Today the Financial Times reported that Edward DeMarco, acting director of the Federal Housing Finance Agency which oversees Fannie Mae and Freddie Mac, is resisting banking lobbyists' efforts on Capital Hill and in the Obama administration to have nearly a trillion dollars in banking losses paid by taxpayers. Elements in the Obama administration who have crafted a scheme to have banks reduce loan balances on homes in foreclosure or about to go into foreclosure, want these GSAs to take responsibility for mortgage reductions in order to preserve the major banks' investments in second mortgages and lines of credit that the homeowners had taken on. In normal foreclosures and bankruptcy proceedings the banks seconds would be defaulted causing them to lose money. The present plan requires the GSAs (thus the taxpayer) to take the loses.
The banks have claimed that the process of bundling mortgages and resale of mortgage trances in bonds and in the complexity of present loan management, matching seconds with individual mortgages is impossible. However, the Office of the Comptroller of the Currency reported that it was able to match over 60% of seconds and mortgages contradicting banking sources. The banks involved in the lobbying: JP Morgan Chase, Bank of America, Wells Fargo and Citigroup. People should inform themselves of this push by the banks and call their representatives in Congress and the White House to stop the rip off.