Massachusetts Attorney General Martha Coakley, D, is calling on the Federal Housing Finance Agency to allow the GSEs to participate in a state-sponsored buyback initiative, as well as to allow principal reductions to keep Bay State residents in their homes “or face legal action.” In a letter dispatched this week to FHFA Director Mel Watt, Coakley said her office is reviewing “all legal options” regarding Fannie Mae’s and Freddie Mac’s refusal to comply with an August 2012 state law.