AgentMortgage

‘Equity sharing’ for underwater homes

Program aims to prevent millions of foreclosures, reduce bank losses

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ISGN Corp. of Bensalem, Pa., has been one of the largest providers of services and technology to the mortgage industry for more than a decade. Among its more than 1,100 customers are global banks and even the top 10 lenders in this country.

So, it would seem ironic that ISGN decided to create a program to address principal reduction, which has been, as everyone knows, an anathema to mortgage lenders since the beginning of time. Even with the Obama administration introducing a principal reduction plan earlier this year and then Bank of America proclaiming it, too, is getting on the bandwagon, there is still no real oomph for lenders to get behind this effort.

As I noted in a previous column, most loan modification efforts have been about reducing interest rates or extending terms of the loan. There is another way -- by reducing the amount of principal on loans that are underwater -- but lenders have always been reluctant to go in this direction for moral reasons (why re...