Loan Modification:

Principal Balance Reduction

A Principal Balance Reduction occurs when your lender reduces the principal amount you owe on your loan, wiping out a portion or all of your negative equity due to the fact that home values have dropped. This is generally the most beneficial type of loan modification for a borrower because it can have an immediate and profound effect on the monthly mortgage payments. This type of loan modification is reserved almost exclusively for second trust deeds, and borrowers who have fallen victim to major violations of the Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act (TILA), or Home Ownership Equity Protection Act (HOEPA). Principal balance reductions can be difficult to negotiate, but the assistance of a loan modification attorney may increase your chances of a successful outcome.

Loan Modification: Types of Loan Modification