California Attorney General Kamala Harris urged Federal Housing Finance Agency leader Ed DeMarco to grant principal reductions on mortgages tied to Fannie Mae and Freddie Mac. Harris’ push for principal reductions echoes the sentiments of some prominent housing analysts and traders. In a public statement, Harris said she views principal reductions as the only way to keep distressed California homeowners in their homes since the aggressive measure would align mortgage values with actual home values. “I call on Edward DeMarco, the regulator of Fannie Mae and Freddie Mac, to implement this common-sense reform, which will serve the interests of American taxpayers and California homeowners,” Harris said in a statement. “If Mr. DeMarco is unwilling to support principal reduction for these home loans in crisis, he should step aside for someone who will.” Harris and New York AG Eric Schneiderman recently broke away from the multistate talks to pursue their own separate claims of securities fraud as well. Her office is in search of harsher penalties against the lenders than the latest proposal. In October, Harris reportedly subpoenaed Bank of America (BAC) to determine whether it or Countrywide Financial lied to investors when selling mortgage-backed securities to them. Harris is not alone in her calls for principal reductions. Bloomberg news obtained a letter from former Deutsche Bank trader Greg Lippman, which shows the famed trader advocating for debt forgiveness in certain instances. Lippman is known for betting against subprime mortgage securities prior to the 2008 unwinding of the housing market. Lippman’s predictions were prescient enough to catch the attention of Senators who compiled a study on the housing market meltdown for the U.S. Senate Permanent Subcommittee on Investigations earlier this year. The Senate Subcommittee uncovered information on Greg Lippman, which showed he had warned colleagues and clients about the poor quality of RMBS securities underlying many CDOs, even describing them as “crap” and  “pigs.” Despite calls for principal reductions, federal agencies, as well as government-sponsored enterprises, have been somewhat cool to the idea. Michael Williams, CEO of Fannie Mae, told HousingWire in September that the GSE has no plans to ask mortgage servicers for principal reductions. In May, Freddie Mac CEO Ed Haldeman, who recently announced his pending resignation from the GSE, said principal write-downs do not make sense for Freddie Mac. Write to Kerri Panchuk.