It would cost Fannie Mae and Freddie Mac almost $100 billion to write down the principal on the underwater loans they control to current market values, according to a new estimate released by the Federal Housing Finance Agency.

The $100 billion tab – on three million loans – would have to be paid by taxpayers in "addition to the credit losses both Enterprises are currently experiencing," said FHFA acting director Edward DeMarco

To date, the U.S. Treasury has pumped $160 billion of cash into Fannie and Freddie to keep their net worth positions in the black.  

The GSE regulator produced the new estimate Monday due to persistent demands by Congressional Democrats to reveal FHFA's analysis for preferring principal forbearance over principal forgiveness (where the principal is permanently reduced.)

"The net result of the analysis is that forbearance achieves marginally lower losses for the taxpayer than forgiveness, although both forgiveness and forbearance reduce the borrower's payment to the same affordable level," DeMarco says in a letter to Rep. Elijah Cummings, D-Md.

Rep. Cummings and other Democrats have been urging FHFA to break with its current policy of prohibiting principal reductions on GSE loans, claiming such actions would reduce foreclosures. 

But DeMarco emphasizes in his letter that the cost of principal reductions would conflict with FHFA's responsibility to "preserve and conserve" GSE assets.  The letter also points out that 80% of GSE underwater borrowers are current on their mortgage – and 74% of underwater borrowers with mark-to-market LTV ratios above 115% are current.

"This trend contrasts with non-Enterprise loans, where many underwater borrowers are delinquent," DeMarco says in the Jan. 20 letter.

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