Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA),  said Thursday he is “deeply concerned” about underwater borrowers, but said that forbearance plans and short sales already serve as forms of principal reduction without saddling taxpayers with further losses.

DeMarco said he would provide a final answer this month on whether Fannie Mae and Freddie Mac would agree to principal reductions as part of a Treasury Department proposal that would use funds from the Troubled Asset Relief Program.

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