Principal Reductions Won’t Solve the Mortgage Mess

May 18 (Bloomberg) -- Edward DeMarco, the temporarydirector of the Federal Housing Finance Agency, continues toendure blistering criticism for refusing to allow Fannie Mae andFreddie Mac to pay for large-scale principal reductions forunderwater borrowers (those who owe more than their homes areworth) or to facilitate refinancings for those stuck with highinterest rate mortgages.

The embattled regulator says he is merely trying to preventFannie and Freddie from adding to the more than $190 billion inlosses that taxpayers have covered since September 2008. ButRepresentative Elijah Cummings has labeled him “the biggesthurdle standing between our nation and the recovery of thehousing market.” House Democrats have accused him of hiding datapurportedly proving that principal reductions would save moneyand reduce foreclosures. And Representative Barney Frank hascalled for his resignation.