Fannie Mae and Freddie Mac, the mortgage lending giants are facing pressure on their position on principal reductions that is out of step with the Obama administration’s directives to expand principal write downs.

The result of this reluctance to get with the program? Nearly 60% (average of both) of their loans were in default a year after modification, compared to 40% of bank mortgages (who are actively reducing principal on their own loans).

Pressed to comment on whether or not they will consider this tactic, both companies and the Treasury Department have been silent.

Both Fannie and Freddie were placed into federal conservatorship in 2008, getting a $127 billion Treasury boost in the process. Their reluctance to agree to the Obama administration’s mandate to consider principal reductions may just be prolonging the inevitable, and it looks like they are running out of time. Housing experts agree that it’s time they get with the program, including putting into play the $75M they have already set aside for preventing foreclosures. The longer they wait, the number of loans backed by Freddie and Fannie that are in default continue to rise.

Obama’s Hardest Hit Fund has tasked ten states with coming up with reasonable efforts to assist unemployed and underwater homeowners. The $2.1B fund should help states put some teeth into their efforts to get Fannie and Freddie to agree to match reductions or provide other relief assistance.

Time will tell, but the rates of default and redefault at F&F continue to rise as time goes by.

 /kh