At a HousingWire conference last week, Freddie Mac CEO Charles Haldeman said the Treasury incentive gave Freddie Mac some incentive of its own to OK principal reductions for homeowners.
“I have to say recently the Treasury sweetened the program and tremendously increased the incentive payments in their offer to us,” Haldeman told the HousingWire audience. “We will reevaluate that to see what may be in our economic best interest. If there are very large incentive payments – which could be 50% of what you could write down – it may be in our economic self-interest to participate in that.”
Both Fannie Mae and Freddie Mac have reportedly started to lay the groundwork needed to begin offering mortgage reductions to financially troubled homeowners. In reports to regulators earlier this month, both lenders have told federal regulators that principal mortgage write-downs could stabilize the teetering U.S. housing market by allowing more Americans to keep their homes.
The more Americans who keep their homes means less houses with “for sale” signs on their lawns. That keeps home values up and pours more money into the creaky U.S. economy.
In an interview with National Public Radio last week, Moody’s Analytics’ Chief Economist Mark Zandi says as much. “Principal reduction works,” said Zandi. “If someone gets a reduction in their principal amount, it gives them a powerful hook to really fight to try to hang on to the home and not go into foreclosure.”
There’s no guarantee that a huge mortgage reduction program is in the works, but at least the table is being set by Fannie Mae and Freddie Mac. That’s good news for homeowners behind on their mortgages, but it might leave more stable homeowners scratching their heads and asking “where’s mine?”