The regulator for Fannie Mae and Freddie Mac said on Tuesday it might make sense for the mortgage finance companies to write down mortgage loan principal under an Obama administration plan but that further study was needed.

Edward DeMarco, the acting director of the Federal Housing Finance Agency, said he was still considering whether to allow the two companies to cut loan balances.

The White House this year said it would offer financial incentives to Fannie Mae and Freddie Mac, which have been propped up with more than $150 billion in taxpayer funds, to help cover any increased costs they might face writing down loan principal.

Fannie Mae and Freddie Mac might apply principal forgiveness, it would have to be clear and transparent, having a basis in the conservatorship mandate, DeMarco said in remarks prepared for delivery at the Brookings Institution.

There may still be improvements to current efforts that can mitigate this risk in a cost-effective way, he added.

(Reporting By Margaret Chadbourn; Editing by James Dalgleish)

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