Because Federal Housing and Finance Agency Acting DirectorEdward DeMarco does not support principal forgiveness, nine state attorneys general areurging President Barack Obama to replace him.

The effort, which includes a letter to Obama, is led by New YorkAttorney General Eric T. Schneiderman and Massachusetts AttorneyGeneral Martha Coakley.

“The FHFA's refusal to allow for principal write-downs thatwould result in more loan modifications is a direct impediment toour economic recovery and stands in the way of our efforts toprovide much needed assistance to homeowners in New York and acrossthe country,” Schneiderman said.

“Under the leadership of Acting FHFA Director Edward DeMarco,Fannie Mae and Freddie Mac remain an obstacle to progress byrefusing to adopt policies that will help maximize relief forstruggling homeowners,” he said.

The time has come for the president and Congress to worktogether to select a new, permanent leader at FHFA, Schneidermancontinued in a release.

The attorneys general, which include California's Kamala D.Harris and Delaware's Beau Biden, claim principal write-downs are acentral component of the national settlement andwould assist in the nation's economic recovery.

The FHFA's continued position that principal forgivenessconflicts with its goal of asset preservation is “not supported byreality,” the attorneys general assert in the letter.

“The agency's current policy actually reduces the value of itsholdings portfolio. It is far more profitable for any financialinstitution to hold a portfolio of performing $200,000 mortgagesthat lets families keep their homes than a portfolio ofnon-performing $250,000 mortgages headed toward default,” theattorneys general said in the letter.

In January, the FHFA announced it would allow some principal forgiveness for underwater borrowers who coulddocument a valid need to relocate, to take a new job or deal with aserious illness. Qualified homeowners could apply for adeed-in-lieu transaction that would eliminate the loan's underwaterbalance.

In addition to New York, Massachusetts, California and Delaware,other attorneys general participating in the effort are LisaMadigan of Illinois, Douglas F. Gansler of Maryland, CatherineCortez Masto of Nevada, Ellen Rosenblum of Oregon and Bob Fergusonof Washington.