Mortgage Principal Reduction

With so many  homeowners mired in terrible ARMs  (adjustable rate mortgages) and  no viable method to free themselves from them, loan mods have been on the rise. But now there is a new sheriff in town. It?s called mortgage principal reduction.

This new program is offered by a large hedge fund that goes in and buys the homeowner?s mortgage at a discount from the lender. The homeowner is then given a new 30-year fixed rate home mortgage at just a few points over prime and credit is not an issue. Not only that,  but the homeowner who was previously underwater (owed more than the property was worth) now has a 10% equity in the home because he is given a mortgage for 90% of the current value.

Under a loan modification,  the bank modifies your current loan and lowers your rate while keeping the balance as it was. So, if you owed more than the house was worth, you are still upside down.

With mortgage principal reduction your monthly payment is now much lower because the balance has been reduced and your new loan is based on that amount.

Also, with mortgage principal reduction, there is no tax consequence for the homeowner as there would be if he/she went thru a short sale.

Larry Potter

Mortgage Principal Reduction