Cutting the mortgage debts of underwater homeowners and letting Freddie Mac and Fannie Mae take the hits is not the best strategy for alleviating the housing stall, the agencies' overseer has told Congress.

Edward DeMarco, acting director of the Federal Housing Finance Agency, which took over the two quasi-government lenders, "sent lawmakers a detailed analysis of why cutting loan balances doesn’t make sense from a financial standpoint, given the regulator’s mandate to 'preserve and conserve' Fannie and Freddie’s assets," The Wall Street Journal said.

DeMarco sent the 23-page letter last week in response to a request from Rep. Elijah Cummings, D-Md. Cummings is the ranking member of the House Oversight and Government Reform Committee.

“Any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco told Cummings.