Fannie-Freddie Regulator Studying Loan Reductions

By: Associated Press
By: Associated Press

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Tuesday, April 10, 2012

The federal regulator who oversees Fannie Mae and Freddie Mac is softening his position against allowing the mortgage giants to reduce principal for U.S. borrowers at risk of foreclosure.

Edward DeMarco, acting director of the Federal Housing Finance Agency, said in speech Tuesday that the agency is studying whether to allow Fannie and Freddie to offer principal reductions. DeMarco says the agency must weigh the reductions against losses to taxpayers, who already have spent $170 billion to bail out the companies.

DeMarco is still cautioning that allowing reductions could lead to a rise in borrowers who strategically default on their loans. But his willingness to consider the concept suggests he's feeling pressure from lawmakers, who have pushed for principal reductions by Fannie and Freddie.

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