When banks voluntarily do principal reductions

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When banks voluntarily do principal reductions

When banks voluntarily do principal reductions

2 Things come to mind immediately:

  1. Seek the advice of a knowledgeable attorney before executing any *new* terms on a contract
  2. Make sure they really own it

FELIX SALMON

The holy grail of mortgage modification is principal reduction — the only thing which gets homeowners out of negative equity hell. And one of the big questions is why it’s not more common: it seems to make sense for all concerned, given that a sensibly modified mortgage is likely to be much more profitable for a bank than forcing a homeowner into a short sale or foreclosure and trying to sell off the home in the current market.

Last week the NYT, in a front-page story, found that Chase is actually doing principal reductions — quietly, on some of the most toxic mortgages written during the subprime bubble. But the mechanism was very mysterious — for one thing, the principal reductions were being done on many mortgages which were actually current and in good standing, rather than on mortgages which were careening towards foreclosure.

Continue reading [REUTERS]

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