Principal reduction offers benefits to both banks and homeowners — which may be the reason banks aren’t offering principal reductions as a an option for mortgage relief. Check out the benefits to both parties int he following article:
Were you aware that banks do have the option of offering principal reduction modifications as an alternative to or in addition to payment reductions? In fact, lenders and servicers have been urged to do so, but it is not happening. Wells Fargo did report that they were offering principal forgiveness to borrowers with Pay option arm loans (those loans that started with low teaser rates of 1% but saw principal balances increasing with those minimum payments from the date the loan was funded. Why is this principal forgiveness being offered to a select few? Why isn’t it an option being offered to everyone?
via HAMP modifications versus principal reduction modifications — what makes more sense?.
