California Democrats up pressure on Obama over home foreclosure relief

A long list of California Democrats is urging President Obama to name a new housing regulator using a controversial recess appointment.

In a letter to the president, more than two dozen House members said the temporary head of the Federal Housing Finance Agency (FHFA), Edward DeMarco, simply hasn't done enough to help struggling homeowners avoid foreclosure. The lawmakers are pushing the president to name a permanent director "immediately." 

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"FHFA has consistently and erroneously interpreted its mandate far too narrowly and as such has failed to take adequate action to help homeowners," the lawmakers wrote. "Installing a permanent director of the FHFA will allow the FHFA to move forward to make key decisions that will help keep families in their homes and improve our economy."

Obama shocked political observers last week by using the recess appointment to plant Richard Cordray atop the newly established Consumer Financial Protection Bureau. The move was cheered by the left but drew immediate condemnation from GOP leaders, who accused the president of overstepping his legal authority by circumventing Congress. 

In their letter, the California Democrats said they "appreciate" the Cordray appointment and asked Obama to "take the same action" to empower a permanent FHFA head.

"The current economic crisis began in the housing market and our economic recovery is dependent on the important work pending before the FHFA," the Democrats said. "It is time to move forward and put in place a permanent FHFA director."

The letter was spearheaded by Rep. Zoe Lofgren and backed by 27 other lower-chamber California Democrats, including Reps. Dennis Cardoza — perhaps Capitol Hill's most vocal critic of the FHFA's foreclosure efforts — and George Miller, who heads the Democrats' Steering and Policy Committee.

Minority Leader Nancy Pelosi (D-Calif.) stayed true to her custom of not endorsing delegation letters, although the San Francisco liberal has been supportive of having FHFA do more to prevent foreclosures.

California lawmakers have reason to be concerned, as one in every 211 properties in the state was in some stage of foreclosure in November — the second highest foreclosure rate in the country, according to RealtyTrac, an online foreclosure database.

The national foreclosure rate is one in every 579 properties.

And the problem could get worse. “November’s numbers suggest a new set of incoming foreclosure waves," RealtyTrac co-founder James Saccacio said in announcing the latest figures.

It's not that the White House hasn't tried to fill the vacancy at FHFA. In November of 2010, Obama tapped North Carolina Banking Commissioner Joseph Smith to head the agency, but Senate Republicans — notably Sen. Richard Shelby (Ala.), the ranking member of the Banking Committee — blocked the appointment.

Facing an impasse, Smith withdrew from the running last January, and Obama has so far declined to name a possible replacement.

The White House on Wednesday declined to comment for this story.

DeMarco has for months been under fire from Democrats, who insist the FHFA — an independent agency that oversees Fannie Mae and Freddie Mac — has more authority to prevent foreclosures than it is using.

He has pushed back against such claims, maintaining that his primary responsibility is the financial health of Fannie and Freddie — which were rescued by taxpayers amid the housing crisis — not foreclosure prevention.

"We have a responsibility to be minimizing losses from older mortgages that have been made, and to provide assistance to homeowners where that assistance is going to lower the cost to taxpayers relative to the cost of that house going through foreclosure," DeMarco said in November.

If "broad relief" to homeowners "is the appropriate public policy," DeMarco added, "the Congress of the United States should enact legislation that provides those funds for that purpose and directs this agency to carry that out."

A key ally for the California delegation in the anti-foreclosure fight has been Rep. Elijah Cummings (Md.), the senior Democrat on the powerful Oversight and Government Reform Committee. Cummings, who has repeatedly called on DeMarco to take bolder actions or step down, said recently that there's been a "disconnect" between FHFA leaders and Obama. 

"I don't think he [Obama] realized how significant the problem was, and I don't think he realized how his people were not effectively addressing this issue," Cummings told The Hill last month. 

Cummings cited Obama's September address to a joint session of Congress, when the president vowed to facilitate more re-financings to help underwater homeowners take advantage of historically low interest rates.

"That’s a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices," Obama said Sept. 8.

DeMarco and the FHFA, Cummings said, simply weren't ready or willing to adopt those changes. 

"I think that there was a disconnect," Cummings said. "I don't think that DeMarco was ready to roll with what the president had said."

Cummings has also been critical of mortgage servicers — both banks and the companies that buy mortgage loans from the banks in hopes of profiting on their management — for resisting the re-financings that could keep more people in their homes. 

Last week, Cummings sent a letter to Rep. Darrell Issa (R-Calif.), chairman of the oversight panel, requesting a hearing to examine how well servicers are maintaining properties abandoned as the result of foreclosure.

Issa, Cummings’s office said Wednesday, has not yet responded.