After months of relative silence, House Democrats have finally begun to assert themselves on the issue of housing and foreclosures, which is directly harming millions of families and threatening economic recovery.

Reps. John Conyers (D-MI) and Marcy Kaptur (D-OH) are circulating a blistering letter to Treasury Secretary Timothy Geithner and Acting Director of the Federal Housing Financing Agency Ed DeMarco (the oversight agency for Fannie Mae and Freddie Mac), criticizing Fannie Mae for threatening to sue homeowners who engage in strategic defaults on their mortgages. In the letter, they also lay out the sundry failures of HAMP, the Administration’s foreclosure mitigation program, which has acted more like a predatory lending scheme for the banks than a concerted effort to help borrowers. Conyers and Kaptur, in a missive to colleagues they hope to persuade to sign on to the letter, say of the strategic default policy:

This opaque, flawed proposed policy would be a poor use of taxpayer dollars, does nothing to help keep individuals in their homes, and will likely result in the targeting of individuals who default on their mortgages through no fault of their own. The letter asks the Secretary of the Treasury and the Acting Director of Fannie’s conservator to indefinitely suspend the implementation of this new policy until the Administration and the Congress have reviewed the implications of this new policy, including cost, transparency, utility, and oversight, and determined if it is in the best interest of the American people to have Fannie Mae pursue such a policy.

Fannie Mae’s proposed action represents government entering the markets on the side of the banks, forcing people to become indentured servants to their underwater homes. In addition, as Conyers and Kaptur say in the letter, it has nothing to do with stopping foreclosures, which should be the core policy objective. Your tax dollars would be used to pursue legal cases against borrowers, instead of trying to keep them afloat. And millions would be spent determining just who defaulted strategically and who defaulted as a result of lack of funds.

Take a look at this excerpt of the multitude of problems Conyers and Kaptur designate with HAMP, responding to the report that Fannie Mae will rely on the servicers to determine which borrowers defaulted “strategically”:

For example, the GAO states, “The most common complaints involved the difficulty in reaching the servicers or not hearing back from them in a timely manner.” Furthermore, since the Treasury has yet to determine and implement metrics for assessing the servicers in terms of communicating with borrowers under the Making Homes Affordable Program, also know as HAMP, it is unclear that Fannie Mae would be able to rely on the servicers’ performance either. The SIGTARP has also found that “…this lack of consistent standards [among servicers] could mean that servicers are inconsistently applying criteria…” The GAO continues, “However, a lack of specific guidelines has also led to significant variations in servicers’ quality assurance programs.”

Conyers and Kaptur hope to get more signers as members of Congress return to Washington in September.

But that’s not the only effort. Brad Miller (D-NC), a member of the House Financial Services Committee who has been at the forefront of pushing legitimate housing policies that benefit borrowers and not lenders, has fired off a letter about the FHFA. As I mentioned, Ed DeMarco is the acting director, and he has consistently subpoenaed banks for passing bad mortgages onto Fannie and Freddie. This has upset the banks considerably, as you might mention. The whole point for them is to toss their toxic waste into the hamper that is Fannie and Freddie, so they can basically put the losses on the taxpayer. DeMarco has tried to stop that, but his acting directorship could be up shortly. The President is set to nominate a new FHFA director, and conservatives and corporate Democrats alike would rather he choose someone that will lay off the banks.

Brad Miller thinks otherwise. His letter to the President demands that the next FHFA director follow DeMarco’s lead, and pursue legal avenues to limit taxpayer losses.

FHFA has pursued two kinds of legal claims to limit taxpayer losses. First, FHFA has demanded that lenders from which the enterprises purchased mortgages buy back mortgages that did not satisfy contractual representations and warranties. As of March of this year, Freddie Mac had demanded that lenders repurchase $4.8 billion in mortgages.

In addition, the two enterprises own approximately $255 billion in “private-label” or “non-agency” mortgage-backed securities. The enterprises have suffered significant losses on these private-label mortgage-backed securities.

Last month FHFA issued 64 subpoenas to obtain information needed “to determine whether losses sustained by the enterprises on [private-label securities] are the legal responsibilities of others.”

You can read the rest at the link. In addition to Miller, Financial Services Committee members Paul Kanjorski (D-PA) and Jackie Speier (D-CA) have signed the letter. Private mortgage investors are trying to pursue the exact same claims as Fannie and Freddie; a corporate stooge should not be installed to shut down these investigations.

As a side note, the President will convene a housing finance policy roundtable next week at the White House, but no affordable housing or consumer groups will play a role in the discussion, according to advocates. So it’s incumbent upon Congress to do its oversight work and help to reset the housing market responsibly, and not on the backs of the taxpayers.