WASHINGTON (3/16/11)--A coalition U.S. House members have urged the Federal Housing Finance Agency to allow principal adjustments to mortgages held by its regulated entities, Fannie Mae and Freddie Mac. In a letter signed by the ranking minority member of the House Financial Services Committee, Rep. Barney Frank (D-Mass.) and 49 House colleagues, the lawmakers said that the guiding principal of FHFA’s conservatorship of the two housing government-sponsored enterprises must be “minimizing taxpayer loss.” The letter claims that the FHFA’s standing opposition to principal modifications in efforts to stave off foreclosures in fact drives up taxpayers’ costs. “Foreclosures result in a loss of 70% or more on the mortgage, and claims against the homeowners for the difference, even in jurisdictions that allow such claims, are usually worthless. Sustainable mortgage modifications that avoid foreclosure will almost always reduce the loss to the enterprise. The legislators letter follows reports last week (News Now March 10) of a group of state attorneys general (AG) and several federal agencies negotiating a settlement agreement with the major mortgage servicers. The state AGs circulated a 27-page outline of what they would like to see in a settlement agreement to address concerns about how mortgage servicers have handled foreclosures. Credit union would not be subject to such enforcement actions. However, the Credit Union National Association (CUNA) has strongly opposed federal legislation that would allow mortgage modifications, which are typically referred to as “cramdowns.” Bills promoting cramdowns have been defeated in recent years, and CUNA continues to monitor recent events for any possible impact on credit unions.