Guidance for dealing with Fannie Mae and Freddie Mac is not included in the recently passed Dodd-Frank Act, and Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees the government-sponsored entities (GSEs) says there is no "silver bullet" for adequately winding down these firms. Speaking at SourceMedia's Best Practices in Loss Mitigation Conference in Dallas, Texas, DeMarco said two factors are necessary to establish before this can happen. The first is that the "hybrid structure of private gain and public risk" needs to be expunged from the operations of the GSEs. The second is that any reform will need a period of transition in order to create the appropriate infrastructure to complete these tasks. He said that streamlined and transparent loss mitigation is "critical" to saving the GSEs. In the Q&A, DeMarco told an attendee that the FHFA believes the area of principal forgiveness remains "fraught with difficulty," and in cases "where there is no borrower," even if homeowners are avoiding contact, then the bank should foreclose. "If you have an abandoned property or a borrower not willing to discuss or work with anything, then get going," he advised. DeMarco added that the government remains committed to providing adequate liquidity and credit guarantees to the US mortgage finance market, saying that the actions of the FHFA will not change that aspect. Write to Jacob Gaffney. The author holds no relevant investments.