After months of pressure from The New Bottom Line, civil rights groups, and state and federal officials, FHFA Acting Director Edward DeMarco conceded today what economists and industry experts have been saying for months – that when properly structured, principal reduction is a win-win for homeowners, investors and taxpayers.

While DeMarco stopped short of announcing that FHFA would begin permitting Fannie & Freddie to do principal reductions, he has now said himself that writing down principal for certain distressed borrowers makes good economic sense. DeMarco is finally admitting the obvious.

You can help keep the pressure on Ed DeMarco to do the right thing. Contact President Obama and tell him to make principal reduction a top priority and to fire Ed DeMarco if he continues to stand in the way of help for homeowners.

Today’s announcement is another sign that we are cracking the big banks’ armor surrounding principal reduction, with growing evidence of its economic benefits and rising demand from struggling homeowners.  But this is just the start. Even the proposal under consideration by DeMarco is too limited.  Fannie Mae and Freddie Mac must allow for systematic and widespread principal reductions for all underwater homeowners in their portfolio.  DeMarco must use also his position to pressure the banks to write down their second liens on these loans.  

President Obama must keep the heat on both FHFA and the big banks to act aggressively to seal this deal and move forward immediately. President Obama cannot allow DeMarco to backtrack from his own remarks. 

If DeMarco refuses to budge, or continues to drag his feet in making a decision, then President Obama has no choice but to replace him and nominate a candidate who won’t let their ideology get in the way of protecting American taxpayers and homeowners.

In addition,the President must also follow through on his announcement at the State of the Union to investigate the full extent of big bank mortgage misconduct and wrongdoing. It’s been over two months since President Obama promised to “establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people’s investments,” but there is still no progress report on the investigation, and none of the promised 55 investigators have been deployed to start working yet. Even the 55 investigators is not nearly enough to hold the entire complex and broad mortgage industry accountable for their possible crimes since 2008. It's high time that this investigation is going at full tilt and is fully resourced. If these investigations are done right, they could mean serious results: Big banks held accountable for the crimes against the American people and our economy and real relief in the form of a minimum of $300 billion in principal reduction for underwater homeowners.

To read stories and see pictures of Americans living with negative equity in their homes, please visit

http://america-underwater.tumblr.com/. America Underwater is a joint project of The New Bottom Line and Rebuild The Dream.