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.