Housing advocates in Chicago and across the country have begun to channel their frustration with the sprawling foreclosure crisis toward one man: Ed DeMarco (pictured), acting director of the Federal Housing Finance Agency (FHFA).
The National Community Reinvestment Coalition (NCRC), which includes several Chicago groups, fired off a letter yesterday to President Barack Obama demanding that he make a recess appointment for a new FHFA director. Meanwhile, the Chicago area foreclosure rate is on the rise.
DeMarco announced last week that he would use his power as FHFA acting director to defy the wishes of President Obama and not reduce the principal on mortgages held by Fannie Mae and Freddie Mac. The federal housing lenders hold more than half of the nation’s mortgages.
Part of the national ‘robo-signing’ settlement that the federal government worked out in February requires that the five financial institutions involved start to write down the principal of mortgages for struggling homeowners. These five major lenders included Bank of America and Wells Fargo.
But FHFA-controlled Fannie Mae and Freddie Mac play by a different set of rules – rules set by DeMarco.
“DeMarco has been a one note acting director and that note has been opposing anything with reductions,” says John Taylor, president and CEO of NCRC.
FHFA has also stepped on local efforts to address foreclosures: The agency sued the city of Chicago in December because the municipality made Fannie and Freddie-owned homes subject to last year’s vacant property ordinance.
Why can the head of an obscure agency work to block the policies of both Barack Obama and Rahm Emanuel? The FHFA was set up in 2008 in the midst of the financial meltdown to become the sole regulator of Freddie and Fannie, the government-sponsored enterprises that were placed in federal receivership.
The establishment of FHFA was chaotic and the long-term consequences of such an agency were unclear. “It was such a hectic time,” says Bob Palmer, policy director for Housing Action Illinois, part of NCRC.
Taylor says that “no one knew what to think” of FHFA when it was first created.
DeMarco is a civil servant, not a presidentially-appointed official, and he has been a de facto agency head since the Obama administration’s start. In order for Obama to name a permanent director, the appointment must receive Senate confirmation, meaning Republicans can filibuster any selection.
But Obama can make appointments when the Senate is in recess as it is now. NCRC points out that the president made a recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau in January 2012 and that Cordray “has already had a positive impact for many consumers and homeowners.”
The urgent call for a new FHFA head comes at an appropriate time for local homeowners. The number of foreclosure filings in the Chicago area increased 35 percent between this July and July 2011, according to RealtyTrac. Much of the increase can be attributed to a delay in filings last year as banks negotiated over the robo-signing settlement.
Nonetheless, RealtyTrac Vice President Daren Blomquist told the Chicago Sun-Times that foreclosure filings “are going to continue to destabilize home values and home prices in the Chicago market and Illinois.”