Principal Reductions- The Golden Egg of Loan Workout Solutions

For most homeowners, a principal reduction is the "golden egg" of loan workout solutions. For those unfamiliar with the term, a principal reduction is the permanent reduction of the outstanding balance of a loan. Basically, a bank writes off a portion of the loan and the borrower no longer owes that money to the lender. As you could imagine, lenders are extremely resistant to offer principal reductions. Principal reductions are designed as a way to assist "underwater" borrowers: Borrowers who owe more on their mortgage than their homes are worth. However, according to Dailyfinance.com, only 4% of all loan modification handed out include some sort of principal reduction. 4%? According to Zillow.com, approximately 28% of American homeowners are currently underwater.

Despite the difficulty Americans seem to have convincing their lenders to offer a principal reduction, Liberty Credit Law is sometimes able to achieve this result for our clients. In fact, we were able to negotiate a $90,795 principal reduction for one of our recent clients!

Here's the story: The client first approached Liberty Credit Law after successfully being granted a loan modification by her lender. However, the terms of this modification were not favorable and were unacceptable for the client. The homeowner decided to retain the law firm for assistance in working out a favorable solution with her lender. After an in depth evaluation and a Net Present Value analysis, the Liberty Credit Law attorneys decided that the best option for the client was to pursue a HAMP modification. The legal team presented a strong case for granting their client a principal reduction as well. After many rounds of phone calls, document submissions, and financial proposals, the bank agreed to offer our client a principal reduction along with a very favorable loan modification. A resolution was reached, giving the client excellent modification terms with an overall savings of $984 a month! The client was able to meet the new temporary requirements, and within a few short weeks Liberty Credit Law was able to secure the client a permanent modification. The client was overwhelmed with joy. She even called the LCL lawyers "Angels". We at Liberty Credit Law were also ecstatic that we were able to achieve such positive results. Congrats to the client on a great modification.

Here are the terms of the final modification:

New interest rate: 2%

New monthly payment: $876.82

Payment Reduction of:51%

Principal Reduction: $90,795