FHFA’s Loan-Balance Ruling More About Politics than Policy

U-T San Diego -- In turning down a Treasury proposal last week to allow Fannie Mae and Freddie Mac to reduce loan balances on some of the mortgages held as investments by those agencies, their federal regulator planted a flag declaring their rights to act independently and follow their best judgment. The Federal Housing Finance Agency, created in 2008 as the latest in a string of regulators for these agencies, faces strong criticism from the Treasury, Democrats in Congress and no doubt a host of private-sector groups.

Irrespective of the side of the argument “to reduce mortgage principal or not” one comes down on, there are other stories behind the story in the headlines. One rationale for the FHFA’s stance is that literally for decades, Freddie Mac and more significantly Fannie Mae had stymied its succession of regulators from improving meaningful constraints on agency operations. (Full Story)

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