Reuters: Regulatory News: Massachusetts wants better terms on mortgage modifications

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Massachusetts wants better terms on mortgage modifications Aug 23rd 2012, 17:52 WASHINGTON | Thu Aug 23, 2012 1:52pm EDT WASHINGTON Aug 23 (Reuters) - Massachusetts on Thursday told Fannie Mae and Freddie Mac that the two government-controlled mortgage finance companies would be required to offer reasonable loan modifications under the state's law and urged their regulator to do more to help struggling homeowners. "These loan modifications are critical to assisting distressed homeowners, avoiding unnecessary foreclosures, and restoring a healthy economy in our Commonwealth," Massachusetts Attorney General Martha Coakley said in a statement. Coakley urged the company's regulator, the Federal Housing Finance Agency, to reconsider its position on allowing Fannie Mae and Freddie Mac to reduce mortgages held by struggling homeowners. In July, the agency's acting director, Edward DeMarco, rejected the Obama administration's plan to use funds from the government's bank bailout program to cut homeowners' mortgage principal. Massachusetts' new law to "prevent unnecessary and unreasonable foreclosures" does not expressly require creditors to offer principal reductions. In a letter to DeMarco dated Thursday, Coakley said the statute "does advance the consensus that asset managers achieve higher recoveries when they employ a broad range of loss mitigation strategies, including the targeted use of principal reductions." The Federal Housing Finance Agency did not immediately respond to a request for comment.

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