Reducing the principal on troubled mortgages may be a part of a settlement offer proposed by state attorneys general to mortgage servicers, but the industry’s largest investors – Fannie Mae and Freddie Mac — say principal reductions are not a part of their plans. Freddie Mac CEO Charles ‘Ed’ Haldeman told a crowd at HousingWire’s REthink Symposium this week principal write-downs do not make sense for Freddie Mac. On principal writedowns, Haldeman said the benefit to Freddie Mac would be quite small because its delinquency rate, at 3.6% in the first quarter, is already quite low and far below the national rate of 8.6%. Fannie Mae had a similar reaction when contacted by HousingWire on the issue of principal write-downs. “Servicers use a number of tools to get an eligible borrower’s mortgage payment down to a level that is affordable and sustainable, including rate reductions, term extensions and principal forbearances,” a Fannie Mae spokesman said. “Principal write down is not one of the tools servicers use on Fannie Mae loans.” At the same time, Freddie CEO Ed Haldeman said he favors some type of government backstop in the future mortgage market to help attract private capital, but he’s leaving major policy decisions up to government officials and simply focusing on the public-private firm’s present-day operations. The GSEs may not have principal write-downs in their bucket of fix-it tools, but a coalition of state attorneys general recently revised a settlement offer with mortgage servicers who are under investigation for their foreclosure practices and apparently principal write-downs are still an option in those negotiations. In an interview with HousingWire, a spokesman for Iowa Attorney General Tom Miller said the proposed offer includes a monetary fund that banks would pay into to cover pay-outs to families in the form of restitution or principal reductions on their mortgages. Reports earlier this week said the AGs dropped their demands for principal reduction from the initial offer, but Miller’s office said some families could still receive this type of assistance. Write to: Kerri Panchuk.