Sense on Cents

On December 23rd in my piece, “Everything’s Negotiable…“, I wrote that I thought for those financially challenged and potentially facing personal bankruptcy with resulting mortgage default and foreclosure that principal reduction was definitely on the horizon. I wrote in that piece:

Additionally, the likely first piece of government assistance to come from the Obama administration is capital to help homeowners in foreclosure or approaching foreclosure. I expect that that assistance will incorporate some degree of mortgage principal reduction.

I would definitely broach with your banker the topic of principal reduction after laying out your budget. The worst that the bank can do is say no. If that is their response you will have been on record as having been proactive in the process and that can’t hurt you if in fact you end up actually defaulting.

Given the anemic response to the current loan modification programs along with the high level of re-defaulting, it is readily apparent that the powers that be should have been listening to Sheila Bair’s proposal on principal reduction from the outset. Sheila promoted the concept of government funding sharing in the losses with the banks in the principal reduction process.

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