By Janie Amaya
Federal Housing and Finance Agency (FHFA) Acting Dirctor Edward DeMarco responded to questions from members of the Senate Banking, Housing and Urban Affairs Committee today over why the agency has paid out $13 million in bonuses to the top 10 executives at twin mortgage giants Fannie Mae and Freddie Mac.
DeMarco defended the boneses, saying FHFA must take such necessary actions to put the regulated entity in a sound and solvent condition in order for it to operate in a safe and sound manner.
“I certainly think we have an entire competitive marketplace in the financial industry that suggests that compensation is an important factor in attracting and retaining high quality talent,” DeMarco said.
On Sept. 8, 2008, FHFA took conservatorship of Fannie Mae and Freddie Mac when the housing crisis began, and has since been working to help both companies regain footing.
“In our time as conservator, we’ve had quite a number of senior executives depart both companies and it has not always been easy to fill these positions with people from the outside,” DeMarco said. He added that often times compensation and the uncertain future of the companies are cited as key reasons for candidates to turn down offers.
DeMarco said that through the Emergency Economic Stabilization Act of 2008, the FHFA must also implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the taxpayers to take advantage of available programs to minimize foreclosures helping the companies succeed.
However, with no improvement in these companies, some committee members argued that the continuing failure is Congress’ fault.
According to top Republican Richard Shelby (R-Ala.), Fannie and Freddie have already requested an additional $14 billion for last quarter’s loses.
“If Congress had acted, taxpayers would not be subsidizing the pay of Fannie and Freddie executives,” Shelby said.
Currently, the FHFA has established a new set of standards for mortgage servicers.
“We try to simplify the process and to provide very uniform guidance to mortgage servicers on what to do the next day after a mortgage payment is missed, DeMarco said.