Calif. Dems in Congress Want Obama to Refinance All Mortgages Held by Fannie Mae & Freddie Mac

October 17, 2011 - 10:20 AM
Fannie Mae offices. (AP photo)

Headquarters office of Fannie Mae. (AP photo)

(CNSNews.com) – Saying they are unhappy with how President Obama has responded to the mortgage crisis, Democrats who represent California in Congress want the president to push the Federal Housing Finance Authority (FHFA) to refinance all mortgages currently owned by Fannie Mae and Freddie Mac to take advantage of historically low market rates.

The California Democrats also want the president to institute a five-year reduction in the interest rates of homeowners who are “underwater” in their mortgages and file for Chapter 13 bankruptcy -- so that the entirety of their monthly payments would go toward paying down the principal on the loans.

"There is no reason why we can't allow Fannie and Freddie to refinance all the mortgages that meet certain basic criteria,” Rep. Lois Capps (D-Calif.) said at a news conference the Democratic delegation held Wednesday to announce a letter they were sending to the White House on Thursday. Capps’ district includes Santa Barbara.

The Federal National Mortgage Association, known as “Fannie Mae,” and the Federal Home Loan Mortgage Corporation, known as “Freddie Mac,” were taken over by the government in late 2008 and placed under the FHFA in order to keep the mortgage giants from collapsing

The Democrats also called on the president Wednesday to unilaterally institute a “Homeowner’s Bill of Rights” – one which would end the requirement that homeowners must be delinquent in order to be eligible for loan modification.

“There is no reason why we can't streamline the system and eliminate needless obstacles. There is no reason why we can't help homeowners before they fall behind on their payments," she added.

The Democrats say that Obama’s action on the housing crisis hasn’t been adequate.

“Everything to date, as well intended as it may have been, has not provided the assistance that we need,” Rep. Mike Thompson (D-Ca1if.), who represents Napa, Humboldt and Mendocino counties in California.

“The challenges that we are facing are exacerbated by an administration that has simply not gotten it right over and over and over,” said Rep. Dennis Cardoza (D-Calif.), who represents the 18th congressional district, which includes Modesto and Stockton.

The congressmen say the “Homeowner’s Bill of Rights,” would eliminate obstacles to modifying loan payments, and create an Office of Consumer Advocate.

It would also:  “(A)llow for flexibility in the debt to income ratio; end the requirement that homeowners be delinquent in order to be eligible for a loan modification; cease dual tracking; and prohibit servicers from reporting adverse credit information while trial or permanent modification is underway,” to quote from their letter.

The Democratic members from California recently met with Treasury Secretary Timothy Geithner, Secretary of Housing and Urban Development (HUD) Shaun Donovan, and acting FHFA Director Edward Demarco to discuss obstacles facing the constituents of the CDCD members.

Several California Democrats in Congress had previously called for Edward Demarco’s resignation earlier in October and maintained that stance Wednesday.

Thirty-three (33) California Democrats signed the letter to Obama including Reps. Karen Bass (Los Angeles), Rep. Lynn Woolsey (Marin), Rep. Pete Stark (Fremont), Rep. Henry Waxman (Los Angeles), and Rep. Judy Chu (El Monte). Rep. Zoe Lofgren (San Jose) is the chairwoman.

According to the press release, a survey conducted by RealtyTrac in September showed that one in every 226 housing units in California had a foreclosure filing during the month of August. California had a 55 percent increase in foreclosure notices during that time.