Three Quarters Of Fannie Mae, Freddie Mac Underwater Mortgages Are Current: Fannie Mae, Freddie Mac Overseer Opposes Mortgage Principal Reduction

From Bloomberg, "Geithner’s Math Puzzle Beyond Numbers for DeMarco: Mortgages" by Clea Benson, Dan Levy and Jody Shenn:

Fannie Mae (FNMA) and Freddie Mac guarantee almost 3 million mortgages that are underwater. Of those, most are not delinquent, [Edward J] DeMarco [Fannie Mae and Freddie Mac’s overseer] said.

"Three out of every four underwater homeowners with mortgages by Fannie and Freddie are current," DeMarco said in an interview on Bloomberg Television’s "Street Smart" with Trish Regan. "These borrowers are making their monthly mortgage payments by honoring their obligations."***Paul Willen, senior economist at the Federal Reserve Bank of Boston, offered evidence in a 2008 study that suggests DeMarco’s concerns about principal reductions may be right.

He found only 5.2 percent of borrowers underwater by 20 percent or more during the 1990s in Massachusetts (DFARMA) lost their homes. Two-thirds of those still in homes in 1994 would have had positive equity if they avoided foreclosure until 2000.

"The idea that there’s a slam-dunk case for principal reductions isn’t true," Willen said in an interview.