The Obama administration's plan to combat the foreclosure crisis can succeed without shielding mortgage servicers from investor lawsuits, Federal Housing Finance Agency Director James B. Lockhart said Wednesday.

Legislation advancing in Congress contains a legal "safe harbor" through 2012 for mortgage servicers that perform loan modifications - a measure fiercely opposed by investors in mortgage securities.

"Obviously the investors don't want [the safe harbor] done, and so my view is that we can work within the present system and get a lot of loan modifications done," Lockhart told Dow Jones Newswires.

Mortgage servicers have cited their fear of investor lawsuits as the principal reason they haven't modified more loans. Skeptics say the Obama housing plan, which offers payments to servicers that perform loan modifications, won't work with the threat of lawsuits from angry investors.

Large mortgage investors - including hedge funds, insurers and investment companies - are mobilizing in Washington to fight the safe harbor legislation. The administration hasn't said whether it supports legislation to give servicers such legal protection.

"[O]ur program does not rely on safe harbor to be effective in offering help to as many as 3 [million]-4 million borrowers," a Treasury official told Dow Jones Newswires.

Lockhart cited "getting investors comfortable with the program" as one of the top two biggest hurdles facing the Obama housing plan, along with spreading the word about loan modifications to strapped borrowers.

He suggested, however, that the blame for the logjam over loan modifications may rest more with the servicers. Such companies "have more leeway than they're using at the moment" to modify loans, Lockhart said he had gathered from conversations with the bank trustees that oversee pools of securities backed by mortgages.

Lockhart, whose agency oversees Fannie Mae (FNM) and Freddie Mac (FRE), wouldn't confirm whether the Fannie Chief Executive Herb Allison would be leaving the company for a Treasury post overseeing the government's financial rescue. The Wall Street Journal reported that Allison had been tapped for the position, but the administration hasn't made any announcement yet. Lockhart praised Allison and said, "I would hate to lose him."

Several key positions at Fannie and Freddie have been left open in recent weeks and months, as the mortgage giants continue to play a key role propping up the U.S. mortgage market. Freddie CEO David Moffett resigned last month, adding to openings for chief operating officer and chief financial officer. At Fannie, the general counsel, chief risk officer and chief technology officer slots are open.

Lockhart said he was working to recruit executives for those positions, and a number of openings at the companies for senior vice presidents. However, he said the threat that Congress might cap bonuses at financial firms, including at Fannie and Freddie, had complicated the effort.

"It's somewhat difficult to hire someone if you can't tell them what you're going to pay them," he said, adding that the legislation would be "very detrimental" if it were passed.

There is some surprise that the new administration hasn't moved yet to replace Lockhart, a Bush appointee. Lockhart said he was enjoying his job, but indicated a desire to move back to the private sector "at some point" after several years in government service. He said he has gotten no indication from the Obama team that they are close to picking his replacement.

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