Government-Backed Mortgage Holders Destroy Detroit Neighborhoods

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For Immediate Release

Date: Monday, August 15, 2011

Contact: Matthew Morgan – 202-226-5543

Government-Backed Mortgage Holders Destroy Detroit Neighborhoods Fannie Mae and Freddie Mac, according to recent news reports, are selling hundreds and possibly thousands of foreclosed homes in Detroit for much less than what they are actually worth. The impact of this rush to foreclose cannot be overestimated. We continue to hear report after report that Fannie Mae and Freddie Mac – the principal mortgage holders and guarantors in Detroit – absolutely refuse to negotiate foreclosure alternatives in good faith with them. As a result, families struggling to retain their homes are pushed out into the street, many of whom face homelessness. In the wake of these unnecessary foreclosures, thousands of empty homes blight neighborhoods across Detroit. And, by selling these foreclosed homes well below their assessed values, these government-subsidized lenders are letting U.S. taxpayers hold the bag, who must cover these mortgage giants’ losses. Rather than throwing American families out in the street and rushing to sell their homes at fire sales, Fannie Mae and Freddie Mac should temporarily cease all foreclosure activities as was done in the aftermath of the Katrina and Rita Hurricanes, when a temporary foreclosure moratorium was instituted for FHA-insured mortgages. The emergency circumstances in Detroit similarly warrant such immediate relief. This moratorium would give Fannie Mae and Freddie Mac time to actively pursue alternatives to foreclosure, such as mortgage modification plans that reduce mortgage principal, which many leading economists believe is essential to jumpstart recovery in the housing market and the Nation’s economy. For nearly four years, my colleagues in Congress and I have pursued legislation authorizing such relief. My legislation, the “Home Foreclosure Reduction Act of 2011,” would allow homeowners to restructure their mortgages by reducing mortgage principal to the home’s fair market value, eliminating onerous penalties, and lowering excessive interest rates under the careful supervision of a bankruptcy judge and trustee. Under my leadership, the Judiciary Committee in the U.S. House of Representatives held ten hearings and several Congressional briefings on the foreclosure crisis. Sadly, under the current leadership of the House, the Judiciary Committee has not held a single hearing on this subject to date. In addition, we have written the Federal Housing Financing Agency (FHFA), the independent agency responsible for Fannie Mae and Freddie Mac, about the blatant deficiencies in foreclosure processing activities by mortgage servicers. We have also written letters to the Treasury Department, the Federal Reserve, and the Comptroller of the Currency calling them to task about these problems. In light of these most recent reports, we intend to immediately request a meeting with the FHFA on behalf of Fannie Mae and Freddie Mac to discuss these concerns and again ask that Fannie Mae and Freddie be made to consider alternatives to foreclosure. Home Foreclosure Reduction Act of 2011