The Treasury Department is fighting back against critics of principal reduction who claim second lien holders will unfairly benefit from a reduction in the loan balances of underwater Fannie Mae/ Freddie Mac loans.

A web posting by Michael Stegman, a housing advisor to Treasury secretary Tim Geithner, points out that the Home Affordable Modification Program (HAMP) is designed to ensure the second lien holder does not benefit at the expensive of the first lien holder.

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