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

The White House has offered financial incentives to the two companies, 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.

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

Before the incentives were on the table, he had maintained that Fannie Mae and Freddie Mac could provide as much relief to distressed borrowers at less cost to taxpayers through loan forbearance.

"Fannie Mae and Freddie Mac might apply principal forgiveness. It would have to be clear and transparent, having a basis in the conservatorship mandate," he 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.

By offering taxpayer money to cover the costs of write-downs at Fannie Mae and Freddie Mac, the Obama administration is hoping to overcome the earlier objections from DeMarco, who is charged with conserving the firms’ assets.

DeMarco has promised to provide a final answer to the administration later this month on whether the financial incentives now make it worthwhile for Fannie Mae and Freddie Mac to write down loan balances.