A rumor is circulating around Washington that the Obama administration is planning on ordering Fannie Mae and Freddie Mac to forgive all of the debt of underwater mortgages.

If this is the case someone is going to be working overtime trying to determine the depth of debt people are in and how the estimated 800 billion dollars will be dispersed to the 15 million homeowners who are upside down on their mortgages.

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011

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File Under: Where is all this money coming from?

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