Reducing Principal will help Reduce Foreclosures

People who face losing their home in foreclosure often ask, "If the bank is going to lose all this money by selling my home at fair market value, why can't they re-work my loan at that same price? I could make
the payment if they would simply reduce my loan balance to fair market
value." In effect, that is exactly what Bank of America is proposing
to do.

Not all of the details are out, but the press release came out today stating that people who owe more than 120% of the fair market value of their home could qualify to have the principal reduced to 100% of fair
market value over a 5 year period. Let's say you have a home that is
worth $100,000, but you owe Bank of America $125,000. If you qualify
for the program your loan balance would be instantly knocked down to
$100,000. The $25,000 debt would still exist, but you won't pay any
interest on that debt, and it will be forgiven in stages over a 5 year
period. At the end of five years all you will have is the $100,000
loan. But if you miss a payment or go into foreclosure the unforgiven
portion of the $25,000 will probably be there waiting for you.

You can read the entire press release here: ShorsalevsforeclosureNC - Link to Article.