Fannie, Freddie Under Pressure to Cut Principal on Loans

Wednesday, 29 Feb 2012 07:39 AM

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Government-backed mortgage lenders Fannie Mae and Freddie Mac are coming under increasingly greater pressure to cut principal owed by homeowners, another way of describing debt forgiveness.

The latest call for such relief comes from California attorney general, Kamala D. Harris, who asked the mortgage finance giants to halt foreclosures in her state, the New York Times reports.

In a letter to Edward J. DeMarco, the regulator who controls Fannie and Freddie, Harris asks for foreclosures to be suspended until DeMarco's agency, the Federal Housing Finance Agency, makes good on a promise to review debt reduction for delinquent homeowners who are underwater.

Editor's Note: Google Banned This Video But You Can Watch it Here

“I know this effort will confirm what many economists have already concluded: principal reduction plans are the most helpful form of loss mitigation for homeowners and the most cost-effective for investors when compared to foreclosures,” Harris writes in the letter, the New York Times reports.

Other states have made similar requests to DeMarco.

DeMarco has said he favors forbearance over forgiveness.

Home prices have fallen to the point that legendary stock picker Warren Buffett has said they are good buys.

Real Estate mogul Donald Trump has also said the housing market is ripe with good deals.

"Housing is one of the great investments right now. I tell people all the time when they come up to me, they say, 'What should I do, Mr. Trump?' I say go buy a house," Trump tells CNBC.

Editor's Note: Google Banned This Video But You Can Watch it Here

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