Kamala Harris, California Attorney General, To Fannie And Freddie Head: 'Step Aside' Over Mortgage Crisis

California Attorney General Kamala Harris has called on the head of the agency that houses Fannie Mae and Freddie Mac to "step aside" if he continues to refuse to reduce mortgage loans for underwater homeowners.

"It has become clear to me that the only way to keep distressed California homeowners in their homes is through meaningful principal reduction," Harris said in a statement Thursday.

The lack of meaningful principal reduction is what drove Harris in late September to exit the multistate settlement talks with major banks that are led by Iowa Attorney General Tom Miller with the support of the Obama administration. The attorneys general of Massachusetts, New York, Kentucky, Minnesota, Delaware and Nevada have also bridled at the settlement efforts, finding the banks' expected $25 billion write-down to be inadequate to protect their states' homeowners from losing their property.

Harris' pressure on Edward DeMarco, who oversees Fannie and Freddie as the acting director of the Federal Housing Finance Agency, serves to further highlight the inadequacies of a deal that does not include Fannie and Freddie, although they own half of the mortgage debt in the country.

California grassroots organizations have voiced their support for the state attorney general. In a press release, the Rev. Lucy Kolin of PICO California, a congregation-based community organizing network, urged Harris to "champion homeowners across California and the nation" who may be shortchanged by the multistate settlement.

"It's time to hold these banks truly accountable, including Fannie Mae and Freddie Mac[,] who continue to keep more than one million California families trapped in unsustainable debt," Kolin said in the PICO press release.

In late October, Delaware Attorney General Beau Biden sued MERS, a private mortgage registry formed by Fannie, Freddie and major banks to bypass public registration of deeds and facilitate the creation of mortgage-backed securities. New York Attorney General Eric Schneiderman has subpoenaed MERS for his own investigation. Both Biden and Schneiderman exited the multistate settlement talks for their failure to look into questionable securitization and fraudulent practices that led to the 2008 mortgage bust.

Comments

[dbrett480]

01:30 AM on 11/24/2011

Good thing Kamala Harris is getting involved in federal affairs since it appears everything is going perfectly well within the state. Unless you count the massive cuts in agents investigating gangs and violent crimes in rural areas, sex offender task forces, gang task forces, etc. And this is happening when we will be releasing more inmates into our communities.

She needs to step aside and let a competent person take over as the chief law enforcement officer in CA.

[truthfinderddw]

06:29 AM on 11/22/2011

DeMarco needs to go. The Housing Crisis has lingered, without adequate intervention, for way to long. The Losses in Equity won't recover for years, if not a decade. Banks created this mess, got a bail-out to survive and don't want to experience the consequences. Consequences are a learning tool for not doing the samething over and over again.

[Lisa Cara]

02:17 AM on 11/10/2011

I find it interesting that so many will defend the most blatant lies, and prefer the most simplistic of scapegoating tactics to acceptance that they may have contributed to their own misfortunes, while insisting their neighbor brought all of his ills upon his own head. The fault belongs to all, we as a nation, are intertwined by the economy. No single person, let alone business can make a misstep without repercussions that will affect someone else. This is what is wrong with how we conduct ourselves. The system relies on everyone doing as they agreed. Business uses every possible tool, including HUMAN PSYCHOLOGY to ENTICE everyone out of their money. Given few of the consumers (who, by the way are largely middle class employees and taxpayers as well) have had the benefit of adequate, let alone specialized education, they are largely marks for a bunch of real genius conmen. Yes, they do want you shills to take all the blame, and the losses and now work harder and longer for less as well. Why anyone is defending this as desirable is beyond my understanding.

[EarlSJ]

09:16 AM on 11/08/2011

Biden, Schneiderman, and Harris are the commonsense patriots in this matter, and, sooner or later, Fannie, Freddie, and the banks will have to do the right thing.

[jefe]

08:11 AM on 11/08/2011

Amen sister! Make it happen nation wide!

[jimtodd]

05:24 PM on 11/07/2011

The so called homeowners in these underwater mortgages need to walk away. They represent around $700 billion in toxic assets that they are carrying for the banks. In their efforts to resist writing down some of that exposure now, they are increasing the risk of it all coming home at once.

[lreyla]

03:00 AM on 11/08/2011

Giving the banks $16 TRILLION has risked the whole economy coming down at once.

[TheIndependenceParty]

07:44 AM on 11/08/2011

Homes and other properties are worth less, ... paychecks worth less ... 401ks worth less, ... the only assets that haven't been reduced are mortgage notes. The banksters and other investors need to cut their principal on notes and not be handed properties free and clear in foreclosure.

[hrc04]

04:49 PM on 11/07/2011

I'm truly in love with Kamala Harris.

[Wupta]

04:18 PM on 11/07/2011

Great move but the market by itself would have largely corrected had we not bailed out the banks. Prices will further come down now that they aren't being fueled by cheap money and speculation.

[Rugby1]

02:11 PM on 11/07/2011

""It has become clear to me that the only way to keep distressed California homeowners in their homes is through meaningful principal reduction," Harris said in a statement Thursday."

Ah so the complete re-writing of contract law.

Let me be clear I was totally against the bailouts and think the banks should have been wound down when they failed.

That being said if you begin re-writing mortgage contracts, what happens when the market finally recovers? Lending institutions will be less likely to provide mortgages if they feel that government can come over and re-write lending contracts for any reason. It will put a chill effect on the mortgage process.

[Jimmijet]

04:50 PM on 11/07/2011

Understand, but disagree, I think the Attorney Generals are trying to avoid unjust enrichment for the banks, or in the alternative, complete devastation and annihilation of homeowners.

[TheIndependenceParty]

07:47 AM on 11/08/2011

The Banksters have been stomping all over the Statute of Fraud, a criminal law.

Contracts are whatever is agreed by two parties, ... but in this case the taxpayers became a third party with the bailout of the banks. The bankster need to be driven to the table to renegotiate, since they have not done so willingly.

[intolleft]

01:54 PM on 11/07/2011

Appropriate response: Go to h e ll.

[Charles Mills]

01:21 PM on 11/07/2011

At least we have a few people doing their jobs in the government... sort of.

[spqr05]

11:30 AM on 11/07/2011

Does this mean it's ok to drive without a drivers license too, or not have auto insurance?

The special treatment of Miss Lohan for not following rules & laws is that she doesn't have to pay a price.

Wow Ms. Harris: it amazes me that you think it's ok for people to not honor contracts; this must mean we are really in line for lots of trouble with your double standards. This person has to pay their full mortgage but the neighbor only has to pay 1/2 because she said so. Why would you reward some and punish others? This means everyone should have a reduction, regardless of circumstances.

Good job!! This is the America I love! I feel like I'm in a tribal area of Afghanistan without laws or rules as they keep changing for those with the guns!!

What ever happened to up holding contracts as long as they were all legal!!!

[KB55]

11:43 AM on 11/07/2011

The only contracts that are strictly followed are big bonuses for leaders of companies that lose their asses and those that are fraudulently made by the lenders.....

[dungfacerepub]

12:57 PM on 11/07/2011

if those contracts were acquired under false pretenses that is a federal crime and will be punished

[intolleft]

01:57 PM on 11/07/2011

False pretense? A home is most likely the largest purchase one will ever make. It is the buyers responsibility NOT to be lead to "false pretenses".

[emmanuel kalu]

11:21 AM on 11/07/2011

it is about time this AG's begin to fight the banks about foreclosure and home. This big banks and even govt agencies continue to make it harder for us to clean up this housing crisises, they are delaying in even normal purchase of homes by qualified buys. if purchasing a fannie or freddie home, you can purchase it for 15 days as an investor. and homeowners are filled with red tapes and delay that just make the purchase of homes frustrating. if we are to fix this housing crisis, there has to be serious effort in reducing principal to market value, reducing interest rate again to market rates, and make every effort to keep those qualified in their homes regardless of how under water they are. more foreclosures means reduced prices, which then forces lots of people underwater and create more foreclosures. all this when there are solutions that can begin cleaning up the mess. allow investor to quickly purchase foreclosed homes, reduce interest rate and principal amount , make loans avialiable for credit worthy people.

[James Haun]

10:48 AM on 11/07/2011

if anyone even seriously considers principle reduction, they better do it across the board for every single mortgage they hold. I have been dutifully paying my mortgage and I'll be damned if people in foreclosure get reduced and those of us that play by the rules do not.

[emmanuel kalu]

11:23 AM on 11/07/2011

yes everyone that has being dutifully paying their mortgage hates this. however if they don't reduce principal and reduce interest rate, more homes are going to be foreclosed and that would lead to the value of your house being reduced also. eventually you would under water also. we need to slow down foreclosures greatly, to stop price depreciations.

[James Haun]

02:59 PM on 11/07/2011

no, I disagree. we need to quit keeping people in homes they can't afford and let the market bottom out. when people start moving back into these houses after they are foreclosed, then our prices will start to climb back to where they should be.

[spqr05]

11:30 AM on 11/07/2011

I second that James!

[GranE]

10:22 AM on 11/07/2011

On Bill Maher's show Biden said Delaware decided they would capture all the info contained in the mortgages for one large database. At 30 million mortgages they lost control of it. It is safe to say that they do not know, nor does anyone else where a deed is or where the signed mortgage is. When a retired couple I know real well paid off their mortgage a year ago, they asked for the original note back they had signed. The Bank said they don't keep those, don't have them. The couple said they would give them two weeks to find it because it could end up in somebody's mortgage loan dept. as unpaid. It took them a month, with an intervening letter to the couple that they had released the lien, and the couple said "not good enough, find the original". They finally came up with it. I truly don't think these mortgage holders have any paperwork to prove anything. Its like musical chairs, when the music stopped they got left holding the bag. And so did homeowners. If they were to sell, how would the closing company find the original paperwork?

[ItsGettingWeird]

04:06 PM on 11/07/2011

Very good point, GranE. Document management & retention during the heady days (2003-2006) looked pretty dicey to me. My hunch is that they're scrambling to resolve this without creating another equity-crushing panic.