JPMorgan Chase is working on in-house, targeted principal reduction programs but has strong reservations about the government's efforts to develop a large-scale, broad-based principal reduction program for first and second mortgages.

"We know this will be surprising to some, but we have found that [interest] rate reductions and term extensions-not principal reductions-have the largest impact in achieving payment affordability and result in more modifications," said David Lowman, chief executive of Chase Home Lending.

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