Mortgage principal reduction not likely for distressed homeowners
It is not likely that underwater homeowners will see any reduction to the principal that is owed on their mortgage
Business Week has a very comprehensive article on the US Foreclosure abuse settlement that would not require banks to reduce the loan balances for the most distressed borrowers. The attorneys general of the 50 states led by Thomas J. Miller of Iowa have been pushing for this in their negotiations.
It's just my opinion but rewarding behavior simply creates more of the same. Don't you think that if your neighbor gets mortgage relief, you should too. So where would it end anyway unless everyone got a free pass.
Speaking of rewarding behavior, the big bankers who almost brought down the financial house have pretty much gotten off the hook. The NY Times has the story of no prosecutions of top figures.