March 7, 2012 at 8:26 PM ET
A simmering debate on Capitol Hill over how to help more than six million Americans struggling to save their home from foreclosure took a strange twist Wednesday.
The inspector general charged with detecting "fraud, waste and abuse" in government-controlled mortgage giant Freddie Mac issued a performance audit that was compromised by heavy redactions in key sections.
Several of the report's 44 pages included blacked-out figures because of concerns over disclosing "confidential financial, proprietary business, and/or trade secret information," according to the explanation provided by the Federal Housing Finance Agency inspector general's office.
The redactions were made at the request of FHFA "and/or" Freddie Mac, according to the report.
FHFA was established in the wake of the financial collapse to oversee Freddie Mac and Fannie Mae, government-sponsored enterprises that were rescued out at a taxpayer cost of well over $100 billion.
The inspector general's report concluded that Freddie Mac alone could save taxpayers “significant” sums of money if it pressed the companies servicing its mortgages to modify more loans.
How much money could taxpayers save? That we don’t know because the OIG redacted the amounts.
For months, members of Congress have been pressing Fannie and Freddie to move more aggressively to modify loan terms to more affordable levels and write down the balances of underwater homeowners. The two enterprises own more than half of all U.S. residential mortgages.
More than 100 members of Congress have written to Edward DeMarco, acting director of FHFA, urging the agency to help underwater homeowners.
DeMarco has defended the refusal to write down loans on grounds that it would inflict large losses on taxpayers and that other forms of mortgage relief are just as effective. Some members of congress aren't buying it.
Reps. Elijah E. Cummings, D-Md., ranking minority member of the House Committee on Oversight and Government Reform and John F. Tierney, D-Mass., said in a letter to DeMarco last month that, according to a former Fannie Mae employee, a pilot program for principal reductions was cancelled because officials at Fannie were “philosophically opposed” to reducing principal.
Last month, California Attorney General Kamal Harris wrote DeMarco urging a halt to Fannie and Freddie foreclosures until FHFA conducts a “thorough, transparent analysis” of the costs and benefits of principal writedowns. In his response, DeMarco declined the request, saying he would "further delay foreclosures provided those borrowers have been given a meaningful opportunity to avail themselves of a loan modification or some other suitable foreclosure avoidance alternative."
Here is the inspector general's full explanation for the redaction:
“This report includes redactions requested by the Federal Housing Finance Agency and/or the Federal Home Loan Mortgage Corporation (Freddie Mac). According to them, the redactions are intended to protect from disclosure material that they consider to be confidential financial, proprietary business, and/or trade secret information. They claim further that the redacted information would not ordinarily be publicly disclosed, and, if disclosed, could place (Freddie Mac) at a competitive disadvantage."
A spokeswoman for FHFA declined to comment further.
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