FHA Calls for Mortgage Principal Write-Downs

October 19 2010 (Jeff Alan)

Federal Housing Administration Commissioner David Stevens this week urged the Obama administration to pressure mortgage lenders to write down principal for underwater borrowers.

“In my view we need to push hard on the industry. Servicers and investors have got to begin writing down principal,” Stevens told a Women in Housing and Finance meeting in Washington, D.C.

Instead of freezing foreclosures, Stevens said, mortgage servicers should be figuring out how to prevent foreclosures to “keep families who could stay in their home in their home so they don’t get to this final stage where we’re worried about affidavits,” Stevens said.

With approximately one in four homes in America underwater, there is rising concern as time goes on more and more of these underwater borrowers may throw in the towel and let their homes go into foreclosure, compounding the current housing crisis.

But what would be left to answer is whether or not that would be fair to the 3 out 4 homeowners who are not underwater. Those homeowners can easily claim that through no fault of their own and good financial planning that a bailout, and that’s exactly what it would be, for a specific group would not be fair.