Debt forgiveness for homeowners?

Image via WikipediaDebt forgiveness for homeowners?

Less than one in 50 mortgage modifications includes debt forgiveness, which is considered the surest way to prevent foreclosure.
For every troubled homeowner whose mortgage principal is reduced in a modification, 39 others end up with more housing debt as lenders tack on missed payments, late charges and even attorney fees to the loan balance.
Lenders are reluctant to reduce principal on delinquent mortgages, and the Obama administration's Home Affordable Modification plan, or HAMP, doesn't force them to. That needs to change, consumer advocates say.
"Ultimately, we believe in order to be effective, HAMP may need to mandate principal reductions," Diane Thompson, counsel for the National Consumer Law Center, told the Senate Banking Committee July 16. "With one out of five homeowners underwater, significant readjustments in principal balances are necessary for the economic stability of the country."


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