California AG pushes Fannie, Freddie to reduce principals for delinquent borrowers

California Attorney General Kamala Harris is putting pressure on Fannie Mae and Freddie Mac to ramp up their effort to reduce principals for underwater borrowers, the New York Times reports.

In a letter last Friday to Edward DeMarco, the acting director of the Federal Housing Finance Agency, which is the regulator in charge of Fannie and Freddie, Harris asked that foreclosures be suspended until his agency is finished with their review of their current policy, which forbids debt reduction for delinquent homeowners who owe more than their home is worth.

DeMarco has come under increasing pressure since the mortgage settlement deal, was announced. Fannie and Freddie loans, which constitute more than 50 percent of outstanding mortgages in the U.S., are not eligible for relief under the deal.

A FHFA spokesperson said the agency would respond to the letter, and would review incentives available under the Treasury’s new Home Affordable Modification Program, commonly referred to as HAMP. The Times said DeMarco had “left the door open to allowing debt reduction.” [NYT]