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President Obama To Forgive Your Mortgage Debt?

On Thursday reports circulated on Wall Street that the Obama administration would push to have Freddie and Fannie forgive some mortgage debt of Americans who are underwater.

According to CNBC’s Rick Santelli the chatter began on July 29th when Morgan Stanley economist David Greenlaw published a report titled “Slam Dunk Stimulus.”

In it he said relaxing refinancing requirements for some 37 million loans already owned or backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration could lead to $46 billion in savings for millions of American homeowners.

However, the Treasury denied any such initiative was in the making.

”But even with the denials Treasury prices are being pushed higher,” says Santelli. “Every trader that I talked with knew about the denials but said hypothetically it could happen and they’re trading on this.”

Like every good trader, the Fast Money gang believes that where there’s smoke there’s fire. For further insights we turned to James Pethokoukis of Reuters who has been reporting on the story and follows Washington very closely.

He tells the desk that the reports make sense. “All the dominoes are in a row,” he says on Fast Money.

But what about the Treasury’s denial?

”Although there’s been push back from the Treasury there has not been push back from the White House,” he reminds.

”Look at the political and economic context,” he says. ”At this point the White House thought the economy would be doing better,” says Pethokoukis. “And they’re facing a tough election in November.”

What's the bottom line?

It seems the White House has to do something to turn the economy around and mortgage forgiveness may be on the radar.

* James Petholoukis has a great deal of inside insights on this issue. Check out our entire interview with him. Watch the video now!

> Click here to read a piece Pethokoukis penned recently called "Can Mortgage Relief Become A Free-Lunch Stimulus?"





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Trader disclosure: On Aug 5, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Seymour owns (AAPL), (BAC), (BX), (GOOG), (INTC), (MOS), (POT); Terranova owns (AKAM), (APA), (BAX), (C), (COP), (EMC), (FCX), (GOOG), (GS), (JNPR), (MOS), (MSFT), (PFE), (POT), (SKX), (SU), (TER), (XBI); Finerman owns (AAPL); Finerman's firm owns (ARM); Finerman’s firm owns (BBY); Finerman's firm owns (LEA); Finerman’s firm owns (KFT); Finerman & Finerman's firm owns (RIMM); Finerman’s firm owns (TSX); Finerman’s firm owns (GYMB); Finerman’s firm owns (PLCE); Finerman's firm owns (WMT); Finerman's firm owns (DAN); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts

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