When Mel Watt was nominated less than a year ago as director of the Federal Housing Finance Agency (FHFA), many housing activists expected him to initiate new polices at Fannie Mae and Freddie Mac that would prevent unnecessary foreclosures and protect neighborhoods still recovering from the housing bust of 2008.
As a congressman, Watt had called on the agency he now heads to help hard-pressed families by reducing mortgage principal on “underwater” loans where the value of the home had fallen below the balance owed. Since Fannie and Freddie, the failed mortgage giants taken over by the federal government, own nearly two-thirds of all residential mortgages in the U.S., loan modifications with principal reduction would benefit millions of struggling homeowners victimized by the mortgage-banking fraud of the “bubble” economy.
