Mortgage principal reductions weighed for Fannie, Freddie

Source: Clea Benson & Cheyenne Hopkins, Bloomberg

The conservator of Fannie Mae (FNMA) and Freddie Mac may let servicers forgive debt on a limited number of mortgages owned or guaranteed by the taxpayer-owned companies, according to a person with direct knowledge of the discussions. The model could be a new California effort that will pay for writedowns using federal dollars set aside for regions that have seen the worst housing-market declines, the person said. Because the government will bear the full costs of the California program, mortgages backed by the two government- sponsored enterprises will be eligible for the first time.

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