We have analyzed the data presented yesterday by FHFA to rebut critics that want the GSEs to provide principal forgiveness instead of repayment forbearance. The data in fact do not demonstrate a substantial difference in GSE risk between forgiveness and forbearance, especially if servicers share in the forgiveness. The defining difference for FHFA seems to be that, with forgiveness, others – notably MIs and second-lien holders – also benefit, whereas in forbearance, the GSEs don’t have to share.

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