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Acting Federal Housing Finance Agency (FHFA) Director Edward J. DeMarco responded Friday to a request from 16 House Democrats to explain the statutory authority that DeMarco has claimed prohibits FHFA from offering principal reduction as part of loan modifications on loans it owns or guarantees. The request was made last November after DeMarco told the House Committee on Oversight and Government Reform that his agency had concluded that "the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer." When a committee member pointed out that several banks are already implementing principal reduction programs in an attempt to help delinquent or underwater homeowners and citing specific examples, DeMarco said "I believe that...()