Mortgage loan modifications: More banks offering reduction in principal


Many economists have long maintained that the only way for mortgage loan modifications to really work is for banks to reduce the actual principal rather than just the interest payments, which tend to simply prolong the torture for many and increase the amount they owe. Getting most lending institutions to do this has been difficult, if not impossible.

This may be starting to change. Best for you to be armed with some key information.

A brand new government survey is showing that 13% of loan modifications in the third quarter of this year "offered a reduction in the principal balance," reports the Christian Science Monitor. That is an increase.

Here's the catch (come on, you knew there had to be one, right?) -- the banks offering the reductions in principal tend to be the ones that actually own the mortgage on the house; mortgages owned by a group of investors usually did not have their principal balance reduced, says the report.