Are Banks Reducing Principle Balances?

The article below from The Wall Street Journal suggests they are but don’t believe everything you read.  I almost want to say that I hope they are but at the same time if they fall back into default they are only prolonging the inevitable.


I am sure many are outraged by this but at the same time it could help to reduce foreclosures sales in neighborhoods.  This in turn could prevent further declines in value.  We will see what happens with this but hopefully it doesn’t create a domino effect and everyone starts to request principle reductions by purposely falling behind on their mortgage.


“Principal reductions are still the exception, though. Tom Kelly, a spokesman for J.P. Morgan Chase & Co., said the lender first tries to make loans affordable by lowering the interest rate for borrowers who qualify for modifications. If that doesn’t result in a low enough payment, the bank may extend the term of the loan or defer repayments on part of the principal. That deferred principal would come due if the home is sold or refinanced.”