Principal Reduction: Who Deserves It?


Tuesday's hearing by the House Committee on Financial Services was ostensibly on "Second Liens and Other Barriers to Principal Reduction as an Effective Foreclosure Mitigation Program," as the mouthful of a title indicates. Many housing experts and regulators have come believe that principal reduction is the most effective way to stave off foreclosures. But amid the finger-pointing, denials and fact-finding, an interesting question emerged: Who, exactly, deserves a principal reduction?

It's a loaded question, fraught with politics, profits and notions of personal responsibility. But the fortunes of many struggling homeowners -- not to mention the government's foreclosure mitigation efforts -- might rest on the answer.