Homeowners unable to meet their current mortgage payments may have a new remedy. Many lenders are showing a new willingness to reduce the principal owed on the property by lowering or “writing-down” the amount. The reduction brings the mortgage loan in line with current property values and borrower incomes. As foreclosures rise so, it seems, does lenders’ flexibility in offering this option: Principal write-down was used in 30 percent of private loan modifications in 2011, as opposed to only 2 percent in 2009.

Foreclosures Will Rise in 2012

Some real estate markets may look like they’re turning a corner, but 2012 foreclosure statistics may not look that different from the numbers in 2011. RealtyTrac reports that there are 1.5 million homes in foreclosure, and 3.5 million delinquent mortgage accounts. The big question is what will happen with the 10 million properties with “underwater” or “upside down” mortgages, where loan balances exceed property value...

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