[1] Federal Housing Finance Agency, “Federal Property Manager Report,” December 2008, http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2008-12-2_FPMReport_508.pdf (accessed June 3, 2016). See also Federal Housing Finance Agency, “Foreclosure Prevention Report—Federal Property Manager’s Report—First Quarter of 2016,” http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FPR_1Q2016FINAL.pdf (accessed July 11, 2016), and Federal Housing Finance Agency, “January 2016 Refinance Report,” http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Refinance_Report_January_2016.pdf (accessed July 26, 2016).
[2] News release, “FHFA Announces Principal Reduction Modification Program and Further Enhancements to NPL Sales Requirements,” Federal Housing Finance Agency, April 14, 2016, http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-PRM-Program-and-Further-Enhancements-to-NPL-Sales-Reqts.aspx (accessed April 19, 2016). Also, while prior non-performing loan pool sales are small (generally less than 1,000 loans per pool), there is some concentration to certain states, particularly to New York, New Jersey, and Florida. Federal Housing Finance Agency, “Enterprise Non-Performing Loan Sales Report,” http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/NPL-Sales-Report_May2016.pdf (accessed July 8, 2016).
[3] See Federal Housing Finance Agency, “Fact Sheet: Principal Reduction Modification Program,” http://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/Principal-Reduction-Modification-Fact-Sheet.pdf (accessed June 3, 2016). See also, Fact Sheet, “Enhanced Non-Performing Loan Sale Guidelines,” Federal Housing Finance Agency, May 14, 2016, http://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/NPL-Fact-Sheet_04-14-16.pdf (accessed July 11, 2016).
[4] The FHFA would cover the cost of such principal reductions, while borrowers receiving the mortgage principal reduction are responsible to cover any federal tax liability associated with the transaction. As a general note, this Heritage Foundation Issue Brief is not a comment on the federal tax treatment of such a debt forgiveness program.
[5] John Ligon, Filip Jolevski, and Norbert J. Michel, “GSE Reform: FHFA Should Not Pursue Mortgage Principal Reduction Alternatives,” Heritage Foundation Issue Brief No. 4108, December 17, 2013, http://www.heritage.org/research/reports/2013/12/home-mortgage-modification-policy-and-principal-reduction-alternatives.
[6] Congressional Budget Office, “Options for Principal Forgiveness in Mortgages Involving Fannie Mae and Freddie Mac,” May 2013, p. 22, http://www.cbo.gov/sites/default/files/cbofiles/attachments/44114_WorkingPaper-OptionsPrincipalForgivenesl.pdf (accessed November 27, 2013).
[7] We have discussed certain characteristics related to borrower behavior and the likelihood of re-default after various prevention efforts that have been studied in some of the academic literature. See Ligon, Jolevski, and Michel, “GSE Reform: FHFA Should Not Pursue Mortgage Principal Reduction Alternatives.” See also Norbert J. Michel and John Ligon, “Why Is the Federal Government Fixated on the 30-Year Fixed Rate Mortgage?” Heritage Foundation Backgrounder No. 2917, June 18, 2014, http://www.heritage.org/research/reports/2014/06/why-is-federal-housing-policy-fixated-on-30-year-fixed-rate-mortgages.
Mortgage Principal Forgiveness Policy Is a Bad Idea - Heritage.org
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