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Critics want housing finance chief out

March 16, 2012: 8:18 AM ET
Ed DeMarco

Community groups are calling for Ed DeMarco's ouster.

The chorus is getting louder.

A growing number of community groups and politicians are calling for the ouster of Ed DeMarco, the chief regulator of Fannie Mae and Freddie Mac.

They see him as the chief roadblock to getting the government-run mortgage finance companies to allow principal reduction, which many experts say is critical to reviving the housing market.

At issue is lowering the mortgage balances of homeowners who owe more than their houses are worth. Most of the Obama administration's foreclosure prevention programs are aimed at reducing borrowers' monthly payments, but they don't do much to help the 11 million people who are underwater.

Although the Obama administration has long been pushing mortgage servicers to do more principal reduction, Fannie and Freddie have steadfastly refused to do so. Fannie and Freddie, which the federal government took under conservatorship in 2008, hold more than half the nation's mortgages.

DeMarco, acting head of the Federal Housing Finance Agency, maintains that his prime directive is to minimize taxpayer bailouts of Fannie and Freddie, which have already received $189 billion. Reducing principal would likely increase that amount.

What's fanning the flames now is the recent $26 billion mortgage settlement that will reduce principal for 1 million borrowers, none of whom have Fannie and Freddie loans. Not surprisingly, those with Fannie and Freddie loans are pretty peeved.

Now, community advocates such as MoveOn.org and Campaign for America's Future are pushing petitions telling Obama to dump DeMarco. A coalition of 97 California community groups called on DeMarco to allow principal reduction or resign. Rep. Barney Frank has also said DeMarco should go.

MoveOn's petition doesn't mince words:

What would it take to save millions of homes and billions of dollars in taxpayer money? Replacing one man—Edward DeMarco, the acting head of the Federal Housing Finance Agency (FHFA).

Odds are that DeMarco will keep his job, political watchers say. Republicans blocked Obama's attempt to replace DeMarco. But expect the calls to continue.

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