Principal Reduction

Principal Reduction

Simply put, mortgage principal reduction is a great way to remedy a troubled mortgage. It is a measure that prevents the high costs of foreclosure and prevents strategic defaults. The Home Affordable Modification Program (HAMP), or “Obama Plan”, originally included a “principal forbearance” element that was virtually ignored by lenders, since their participation in the program is voluntary. In addition, most banks created their own proprietary or “in-house” loan modification programs which were designed to assist the homeowners that did not qualify for assistance under the more stringent HAMP guidelines. However, even these programs rarely included a principal reduction component.