Homeowners facing foreclosure whose mortgage loans are insured by Fannie Mae or Freddie Mac have not been eligible for principal reductions, which is one of the best tools for making mortgage payments more affordable, when modifying their loans. That may be changing soon.
Fannie Mae and Freddie Mac are regulated by the Federal Housing Finance Agency, or FHFA, which has indicated that it is considering allowing principal reductions.
However there have been conflicting reports on the FHFA's intention. The Wall Street Journal reported in March that Fannie and Freddie principal reductions were going to happen. But that same day FHFA's director Mel Watt said that no decision had been made.
Recently some people in high places have asked the FHFA to allow principal reductions. According to housingwire.com,New York's attorney general Eric Schneiderman wrote a letter to director Watt saying that principal reducing loan modifications“should be deployed broadly and quickly to homeowners in desperate need of this relief from the continuing damage caused by the housing crisis.”