Mortgage Principal Forgiveness Policy Is a Bad Idea

The Federal Housing Finance Agency (FHFA) continues to pivot on mortgage principal forgiveness policy, initiating a new program that would subsidize a permanent reduction of a portion of unpaid mortgage principal owed by homeowners. The mortgage principal forgiveness program would give preference to some homeowners already in the Fannie Mae-guaranteed and Freddie Mac-guaranteed portion of the housing finance system.

Instead of implementing this new program, the FHFA should abolish any policy that expands the influence of these two enterprises in housing markets and support housing-finance reforms aimed at shutting down these government-sponsored enterprises (GSEs). Until Congress passes legislation that shuts down Fannie Mae and Freddie Mac, the FHFA should cease the implementation of its new mortgage principal forgiveness program and end the financing of any similar mortgage-relief subsidies.

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