Federal Housing Finance Agency Director James B. Lockhart said a looming accounting change will make it less painful for Fannie Mae (FNM) and Freddie Mac (FRE) to modify loans.

The government-controlled mortgage-finance giants are a key part of the administration's strategy to help strapped homeowners. But accounting rules require them to take a 60% write-down on loans they purchase out of pools of mortgage-backed securities to modify them, Lockhart said Thursday in Washington.

That will change on Jan. 1, when a new Financial Accounting Standards Board rule will take effect, forcing Fannie and Freddie to bring the mortgage-backed securities they guarantee onto their balance sheets.

"With a stroke of a pen, the FASB is going to increase their balance sheets from $2 trillion to over $5 trillion," Lockhart said.

- Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com