Mortgage-backed securities strategists at Credit Suisse say the market-wide impact of potential Fannie Mae and Freddie Mac principal writedowns on securitized mortgages would be minimal. The Credit Suisse comments come in response to recent news reports that the Obama administration is pressuring the two government-sponsored enterprises to force principal writedowns for underwater borrowers, something they have thus far resisted. Credit Suisse analysts said that the number of incremental mortgage borrowers is so small that the power of such a program would be limited due to the small number of people who would qualify. The Wall Street Journal reported that the GSEs are being pressured to participate in the Federal Housing Administration’s short refinance program. Participation so far has been weak, with only 61 applications in the first three months and only three processed, according to the WSJ. "We believe the market impact of this program should be more symbolic and psychological than fundamental," write analysts Mukul Chhabra, Qumber Hassan and Mahesh Swaminathan. "We estimate that 5% to 15% out of the $224 billion outstanding balance of more than 105% LTV loans from 2005-2008 vintages might qualify," they write in a note to clients (See below chart; Click to expand). Furthermore, such a program will likely need congressional approval and require the distressed borrower to be in imminent default. "Borrowers who meet the imminent default criteria are already being offered HAMP," the government-sponsored mortgage modification program, they write, "so there are no incremental borrowers for the new program – just a shift from HAMP to FHA short refi." The analyst doubt that, given the current makeup of Congress, getting a large, market changing mortgage reduction program passed into law unlikely. Write to Jacob Gaffney.