Home mortgages: Fannie Mae, Freddie Mac regulator defends write-down opposition Under increasing pressure from Democrats to do more to stem foreclosures, the regulator for Fannie Mae and Freddie Mac on Tuesday strongly defended his opposition to allowing the government-owned housing finance companies to write down mortgage principal for "underwater" homeowners. Edward DeMarco, acting director of the Federal Housing Finance Agency, told senators that reducing the amount owed by homeowners on mortgages owned or guaranteed by Fannie and Freddie was not consistent with his responsibility to protect taxpayers. The government has pumped $183 billion into the companies, which were bailed out after being seized by the agency in 2008 to prevent their bankruptcy. DeMarco said executives at Fannie and Freddie "have advised me they do not believe it is in the best interest of the companies" to write down mortgage principal to reduce foreclosures. Foreclosure is the worst possible outcome in most instances. It is the most costly, it is the most devastating to the family and it is the most devastating the the neighborhood," DeMarco told the Senate Banking Committee, touting other steps such as interest rate reductions that Fannie and Freddie have taken to help keep struggling homeowners from defaulting. The agency has "a responsibility to find all prudent actions" to prevent foreclosures, he said. But refinancing, modification of the length of the loan, and deferring payments on mortgage principal all are more effective at keeping people in their homes and not increasing the risk to taxpayers of losses on the bailouts of Fannie and Freddie, DeMarco said. Democrats pushed DeMarco to change his position amid news Tuesday that the Standard & Poor's/Case-Shiller index of the nation's largest cities fell to its lowest level since the housing crisis hit. They said principal reduction would help stabilize the housing market, ultimately reducing taxpayer losses on the Fannie and Freddie bailout because mortgages would not end up in foreclosure. "In my view, the FHFA has shown a dismal lack of initiative in the housing crisis and needs to be far more aggressive in taking steps that can help both homeowners and taxpayers," said Sen. Robert Menendez (D-N.J.). The banks are finding it profitable to give principal reductions to about 20% of their own loans while, ironically, the government isn't allowing principal reductions on any loans. Fannie and Freddie own or guarantee 60% of mortgages nationwide. Housing and Urban Development Secretary Shaun Donovan admitted principal reduction is the one foreclosure-prevention tool that the administration has made the least progress in employing. But FHFA is an independent agency. DeMarco had been chief operating officer at the agency and became acting director in 2009. The White House has tried to replace him, but Senate Republicans have blocked confirmation of President Obama's nominee for the job. Republicans, who oppose more government intervention in the housing market, praised DeMarco on Tuesday. But he acknowledged "there appears to be a lot of criticism" of his performance. Gen. Kamala D. Harris has called on DeMarco to resign. In a letter released Monday, she asked him for a freeze on foreclosures in the state until the agency did a "thorough, transparent analysis of whether principal reduction is in the best interests of struggling homeowners as well as taxpayers." Also on Monday, 115 House members wrote to DeMarco calling for principal write-downs by Fannie and Freddie. Home prices hit new lows U.S. unveils new strategic plan for Fannie Mae and Freddie Mac