The other day we appeared on Sam Seder’s program,The Majority Report, to discuss the radical-right ideology of Edward DeMarco, a Bush appointee who became Acting Director of the Federal Housing Finance Agency (FHFA) and continues in that role because Congress won’t confirm President Obama’s nominee.
As we wrote last week, DeMarco is single-handedly blocking relief for millions of struggling homeowners and is using deception to justify his actions. He refuses to allow Fannie Mae and Freddie Mac, the two government-sponsored enterprises he now directs, to reduce principal or even interest rates. Some underwater homeowners are paying as much as 7 percent interest, while loans are now available at 4.3 percent.
DeMarco deceived lawmakers by suggesting it would cost $100 billion to write down mortgage principal while, as we wrote last week, his own agency’s estimates show that it would probably save more than $28 billion.
It gets worse. Even in the days since we taped this interview the DeMarco train has continued to ride the housing market off the rails. An academic has studied DeMarco’s insistence on increasing the Fannie/Freddie financial portfolio — which he says has no bearing on his refusal to do more to help homeowners — and has concluded that “there is a very significant conflict of interest” which DeMarco and others have understated.
DeMarco’s team has invested roughly $5 billion of Freddie Mac’s $650 billion in “reverse floaters” which are essentially bets that the homeowners who aren’t being helped by DeMarco’s team will never get helped. That conflict of interest is actually understated, said Christopher Mayer of Columbia Business School, because these “floaters” are derivatives which link back to $26 to $30 billion in mortgages. That makes the amount of mortgage loans subject to this conflict five to six times what was originally believed.
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