The Wall Street Journal has an article today regarding mortgage companies newest idea in slowing the foreclosure rate – the mortgage companies idea, cutting the mortgage principal that default borrowers owe.
From the Wall Street Journal.
Reducing the principal on mortgagees is “a last resort” says Paul Koches, executive vice president at Ocwen Financial Corp, a West Palm Beach Fl., loan service that has shrunk the amount owed (principal) on 10,884 delinquent mortgages as of Sept 30. That is 23% of all loans modified by Ocwen so far this year.
Here’s by big idea, why not reward (reduce the principal) on those who pay on time instead of those in default.
J.P Morgan has a different twist which is to reduce loan payments on a smaller loan but if the original loan is refinanced or the property is sold the full loan amount would need to be repaid.