UPDATE: FHFA's DeMarco Says Fannie Mae, Freddie Mac Won't Write Down Loans, Cites Risk-Reward; Insurers on Watch (MBI) (RDN)
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(Updated - July 31, 2012 2:20 PM EDT)
Fannie Mae (OTCBB: FNMA) and Freddie Mac (OTCBB: FMCC) won't write down mortgage loans, according to FHFA's Ed DeMarco.
UPDATE - The call comes following pressure from the U.S. Treasury Department, which is offering incentive payments for write downs. Today, U.S. Treasury Secretary Tim Geithner stated, in a letter to DeMarco, "I do not believe it is the best decision for the country. The use of targeted principal reductions by the GSEs would provide much-needed help to a significant number of troubled homeowners."
DeMarco said a reduction in principal will not benefit taxpayers and it raises strategic default risk. Overall, a write-down has benefits that are too small when compared with risk uncertainty associated with the move.
Headlines come following reports Monday that FHFA forgiveness would benefit troubled borrowers.
Traders might keep an eye on mortgage insurers following the news. That list includes: MGIC Investment (NYSE: MTG), Radian Group (NYSE: RDN), MBIA (NYSE: MBI), and Old Republic (NYSE: ORI).
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Fannie Mae (OTCBB: FNMA) and Freddie Mac (OTCBB: FMCC) won't write down mortgage loans, according to FHFA's Ed DeMarco.
UPDATE - The call comes following pressure from the U.S. Treasury Department, which is offering incentive payments for write downs. Today, U.S. Treasury Secretary Tim Geithner stated, in a letter to DeMarco, "I do not believe it is the best decision for the country. The use of targeted principal reductions by the GSEs would provide much-needed help to a significant number of troubled homeowners."
DeMarco said a reduction in principal will not benefit taxpayers and it raises strategic default risk. Overall, a write-down has benefits that are too small when compared with risk uncertainty associated with the move.
Headlines come following reports Monday that FHFA forgiveness would benefit troubled borrowers.
Traders might keep an eye on mortgage insurers following the news. That list includes: MGIC Investment (NYSE: MTG), Radian Group (NYSE: RDN), MBIA (NYSE: MBI), and Old Republic (NYSE: ORI).
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