Mortgage servicers participating in the Home Affordable Modification Program (HAMP) are starting to use principal reduction more often to help underwater borrowers and make their payments more affordable.
A HAMP report released on Friday shows that HAMP servicers have completed 4,900 modifications involving principal reduction. The median average principal amount reduced was $69,500 per loan.
"Although these numbers are small to start with -- it is growing," said Laurie Maggiano, director of policy at Treasury's homeownership preservation office.
"Investors are beginning to recognize that [principal reduction] makes sense," the Treasury official said in an interview with NMN.
The May HAMP performance report also provides more data on modifications of second liens.
Servicers have modified 28,800 second liens and extinguished 1,500 second liens. The average amount of the fully extinguished second liens was $65,250.
Bank of America has extinguished 1,340 second liens and Wells Fargo Bank has extinguished 106 second liens. CitiMortgage and JPMorgan Chase have not extinguished any second liens, according to the HAMP report.
