Mortgage debt to be forgiven?

There is speculation that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth, according to Reuters columnist James Pethokoukis. An estimated 15 million U.S. mortgages — one in five — are underwater with negative equity of some $800 billion. The vehicle for the bailout could be the Bush administration’s Home Affordable Refinance Program — or HARP, a sister program to Obama’s loan modification effort — which was just extended through June 30, 2011. The bailout, according to Reuter’s, “would be a stunning political and economic bombshell” before a midterm election in which Democrats are expected to suffer losses. The Treasury Department is scheduled to hold a meeting on the future of Fannie and Freddie on Aug. 17. [Reuters]