The Federal Reserve may soon begin modifying mortgages it owns within the mortgage-backed assets it has purchased from government-sponsored entities, according to a letter written Tuesday by Fed chairman Ben Bernanke and addressed to Committee on Financial Services chairman Barney Frank, D-Mass. “The goal of the policy is to avoid preventable foreclosures on residential mortgage assets that are held, owned or controlled by a Federal Reserve Bank and that are subject to the policy through sustainable loan modifications and other actions that are consistent with the Federal Reserve’s obligation to maximize the net present value of the assets for the benefit of taxpayers,” the letter read, in part. Read the letter. The modifications will likely come in the form of “rewritten” loans as far as terms, interest rates and principle balances are concerned. Sources have said the Fed’s modification policy will focus on reducing the principal amount for homeowners at risk of foreclosure on mortgages with balances of more than 125 percent the estimated value of the home, according to a Washington Post report published Wednesday. It was unclear at the time this story was published how many Fed-owned mortgages have fallen so far underwater as to be eligible for the program. The Federal Reserve Bank of New York has reported so far taking on some $52.6 billion from Freddie Mac (FRE), Fannie Mae (FNM) and Ginnie Mae through its agency $500 billion MBS purchase program. Although not all of the transactions reported had closed at the time this story was published, the Fed had so far claimed approximately $28.2 billion from Freddie’s sheets, $20.2 billion from Fannie and another $4.2 billion from Ginnie. As of Jan. 22, the Fed reported having completed transactions valued at just under $6 billion. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.