Only 5% of Underwater Homes May Qualify for Write-Downs

mortgage principal reduction
mortgage principal reduction

Only about 1 in 20 underwater homeowners may qualify for principal reduction under states' recent settlement with five big banks, a new study says.

A calculation by a Brookings Institution economist narrowed down the pool of underwater homeowners to 500,000 who could qualify for principal reduction from the $25 billion mortgage settlement.

As first reported by The Washington Post, Ted Gayer found that, in using the parameters of the settlement, just 5 percent of the nation's 11.1 million underwater borrowers could get the principal reduced on their mortgage.

About $10 billion of the settlement, in the form of credits, will go toward principal write-downs made by the five banks. Only homeowners delinquent on their mortgages are eligible.

Read the full story at HousingWire.