Treasury Secretary Timothy Geithner reiterated support Wednesday for mortgage principal reductions at Fannie Mae and Freddie Mac.
In public remarks, Geithner said the administration was continuing to make the case for principal write-downs to the Federal Housing Finance Agency (FHFA), the regulator of the two mortgage giants.
"This would be a useful part of what they're trying to do, and would probably improve — almost certainly would improve — overall returns to the taxpayers in those companies," Geithner said in a discussion at the Brookings Institution with Washington Post columnist David Ignatius.
The two government-sponsored enterprises have resisted such reductions despite Treasury's efforts to expand write-downs through the Home Affordable Modification Program (HAMP), an administration plan to provide resources for helping troubled borrowers.
On April 3, a group of 30 U.S. senators sent a letter to Acting FHFA Director Edward DeMarco urging him to provide Congress with an analysis of the effects on taxpayers of using principal write-downs compared to other types of loan modifications.
Geithner said Wednesday the number of families that would benefit from principal forgiveness is significant. "Not overwhelming, but significant," he added.
Geithner said the most promising steps to facilitate recovery in the housing market include supporting mortgage modifications for Americans who have income and can afford to stay in their homes; helping more borrowers — even those who are underwater — refinance; and moving the large stock of vacant foreclosure properties into the rental market.
"Our basic approach on housing is that we're going to keep at it until we see a much more durable set of improvements coming," he said.