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ATTORNEYS GENERAL DEMAND INDEX OF IMPROVING NEW LEADER FOR FHFA MARKETS SEES FIRST DECLINE IN 8 MONTHS A coalition of nine state attorneys general is petitioning the national government to replace the Federal Housing Finance Agency's (FHFA) acting director. The coalition charges Edward J. DeMarco with positioning Fannie Mae and Freddie Mac as a "direct impediment to our economic recovery." The group called for his replacement in a joint letter to President Obama, Senate Majority Leader Harry Reid (D-Nevada), and Senate Minority Leader Mitch McConnell (R-Kentucky). "The time has come for the president and Congress to work together to install a new, permanent leader at FHFA that will be a partner, not an impediment, in the national effort to comprehensively address the foreclosure crisis," said New York Attorney General Eric T. Schneiderman, a coalition member. The attorneys' general complaint stems from DeMarco's refusal to allow the GSEs to engage in principal reductions for underwater homeowners. The issue of principal writedowns has led to a contentious and lengthy debate between DeMarco and other government officials, with DeMarco remaining firm in his stance that reducing principal balances is not in the best interest of the GSEs or taxpayers. The attorneys general argued that principal forgiveness is beneficial to homeowners, financial institutions, and the economy overall. They pointed out this strategy is a key part of 16 last year's National Mortgage Settlement and assert that the FHFA's aversion to the practice "is inconsistent with its combined goal of asset preservation and foreclosure prevention." The attorneys general suggested a portfolio of $200,000 loans that are performing is "far more profitable" than a portfolio of $250,000 nonperforming loans. DeMarco's insistence that principal forgiveness does not support the goal of asset preservation "is not supported by reality," the attorneys general stated in their letter. In addition to Schneiderman, the coalition includes Massachusetts Attorney General Martha Coakley and California Attorney General Kamala D. Harris, who have also been outspoken about the foreclosure crisis. Attorneys general from Delaware, Illinois, Maryland, Nevada, Oregon, and Washington have also joined the coalition and signed the letter calling for DeMarco's removal. "We believe that until new, permanent leadership is named to FHFA, [the GSEs] will continue to stand as a roadblock to comprehensively addressing the foreclosure crisis," the AG letter stated in its closing line. The letter is one of several pleas to install a new FHFA director. In February, 45 members of the House of Representatives sent a letter to the president urging for DeMarco to be replaced. After climbing for seven straight months, the improving markets index (IMI) from the National Association of Home Builders (NAHB) and First American fell by one market from the prior month. The index identified 273 markets as improving in April, down from 274 in March. Although the index welcomed five new markets in April, six dropped off the list. New entrants included Macon, Georgia; Portland, Maine; Rocky Mount, North Carolina; Eugene, Oregon; and Jackson, Tennessee. The six markets taken off the list were Napa, California; Tallahassee, Florida; Bangor, Maine; Brownsville, Texas; Roanoke, Virginia; and Yakima, Washington. All 50 states were still represented on the index. "The stability in the improving markets list this month is encouraging, with three quarters of all metros tracked by our index considered on the upswing as the housing recovery spreads to parts of every state," said Rick Judson, NAHB chairman and a homebuilder from Charlotte. "In some markets, the main thing that's holding back a recovery is a relatively thin inventory of homes for sale, which could be resolved if builders had easier access to credit for building homes and putting people back to work." Only markets that have shown improvement from their respective troughs in housing permits, employment, and house prices for at least six consecutive months are categorized as improving. After strong gains through late 2012 and early 2013, David Crowe, NAHB's chief economist, projects future expansions to the list will be more moderate, in part due to challenges related to increased demand and short supply. KNOW THIS At 4,997,000, Lender Processing Services says the industry's total inventory of non-current mortgages (loans 30+ days delinquent and in foreclosure) has fallen below 5 million for the first time since 2008.

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