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DeMarco Stands Firm Against Principal Reduction Scheme

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mortgage incentives might help


Whether investment properties or primary homes, the current number of underwater mortgages and foreclosures is seen by many as one of the largest hindrances to the quick recovery of the housing market. The Obama administration is facing huge pressure to redress this issue and one of their attempts is to offer attractive incentives packages to mortgages houses Freddie Mac and Fannie Mae for the reduction of principal to underwater homeowners who are behind on their payments.

Since the Obama administration recently offered to triple the incentive package if the mortgages houses agreed to do its bidding, new analyses show that Freddie Mac and Fannie Mae actually stand to save money by agreeing to reduce principal. However, action is slow to come because Ed DeMarco of the Federal Housing Finance Agency, regulator of both the mortgage houses, is heavily opposed to the idea.

Standing firm against pressure from all sides, Marco insists that the principal reductions would cause more harm than good in the long term. He states that while the move would benefit some 600,000 homeowners who are currently delinquent on their payments, it would encourage the other currently on-track 2 million borrowers to begin defaulting. For more on this article, continue reading here.

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