Bank of America is looking to offer more principal reductions for homeowners that have lost value in their homes and now have an underwater mortgage. In an article on money.cnn.com, it states that while not all homeowners are going to be able to get a principal reduction, homeowners that are greatly distressed in their mortgages may soon find help.
Homeowners that have an underwater mortgage, meaning they owe more than their home is worth, have been walking away from their home and as this is becoming more and more common there is also the trouble being caused since more and more homes are losing value.
Principal reductions are becoming more common, but banks are still resistant to principal reductions on a more widespread scale. Many feel that homeowners that have an underwater mortgage have an obligation to stick with their mortgage since there are no guarantees that a home’s value will rise.
However, with the extent that some homes have lost value, it’s not hard to see why someone that views their home as an investment would simply want to get out. Yet, it is hoped that principal reduction programs are going to give homeowners the incentive to stick with their mortgages and see a bright spot in a gloomy housing situation.