Principal Reduction

A principal reduction is when a lender or servicer voluntarily agrees to reduce the principal balance. The reasons for this are generally varied and unique. But at the Law Offices of Evan M. Rosen, we have successfully helped Florida homeowners obtain principal reductions.

While we cannot guarantee an outcome, you can always expect that we will work hard and be honest with our clients. We follow the golden rule—treating our clients the way we’d want to be treated, and treating their cases as if they were our own.

While principal reduction isn’t always possible, we always place our client’s needs first and provide the best possible legal advice and service we can. If a principal reduction is best for you, then we will gladly explore it. Sometimes, we need to aggressively litigate a case to find ways to create some leverage. There have been many cases in which we find a sensitive issue that causes the bank to want to quickly cut a deal.

You are welcome to read more about principal reductions below or you can contact us now for a consultation by calling 754-400-5150 or by filling out our online form.

Understanding Principal Reduction

There are programs in place which claim to help homeowners to reduce their monthly mortgage payments. But, there is no program that requires a bank to reduce principal.

Unlike reducing an interest rate or extending the repayment period, reducing principal actually reduces the balance due so that the borrower has less to pay back. For example, if a bank lent $300,000 on a house that is worth $250,000 now, the lender might reduce the actual balance on the mortgage to $250,000—the current market value of the home. When this principal reduction occurs, the borrower doesn’t have to pay back that extra $50,000. Rather, it is permanently forgiven. Lenders are generally reluctant to reduce principal but it can and does happen. We have obtained numerous principal reductions for our clients.

Please keep in mind that there can be tax consequences with principal reductions. This is something we can explore with our clients and tax professionals when the issue comes up.

Options for Reducing Principal

Although lenders may be more willing to modify a mortgage in other ways, it is possible to have the principal balance reduced on your loan in certain circumstances. The best way to achieve this goal varies in every case.

An important step in determining if you are eligible for principal reduction is finding out if your debt is backed by Fannie Mae or Freddie Mac, two government agencies that guarantee mortgages. Loan servicers whose loans are “owned” by Fannie or Freddie are currently limited in their ability to forgive loans that are owned by investors. The limitations will make it more difficult to obtain a principal reduction if your loan is backed by one of these government-sponsored entities (GSEs). That said, we have cut all kinds of deals with Fannie and Freddie, so a principal reduction is still possible.

If your loan is not backed by Fannie Mae or Freddie Mac, each bank has their own programs. Some of those address when principal may be reduced. Regardless of those programs though, if during the course of litigation we expose a significant problem for a bank, they can get a higher ranking bank officer involved in the case, and that person often has authority to cut a special deal to make the issue “go away.” This has happened more than once. We have even obtained satisfactions of mortgages/clear title for our clients as part of some settlements.

Ultimately, the best way to work towards a principal reduction is by creating leverage. Through diligent and thorough litigation, our Fort Lauderdale and Hollywood principal reduction lawyers and staff have uncovered evidence of fraud, false documents, “robo-signing,” servicing errors, misapplication of payments, evidentiary violations, discovery violations, illegal collection practices, and more. That evidence shifts the bargaining strength. If the fraud is egregious enough, goal number one is to seek to have the mortgage and debt cancelled—a rare but obtainable goal. Otherwise, goal number two is often to seek a principal reduction. That’s also rare but something that we have accomplished for many clients.

Getting Legal Help

Principal reduction is one of the more difficult types of loan modifications to obtain. Working with an experienced Fort Lauderdale and Hollywood foreclosure defense attorney, gives you the best possible chance of obtaining one.

At the Law Offices of Evan M. Rosen, we are skilled negotiators, knowledgeable about Florida foreclosure laws, and competent and diligent advocates for our clients. We enjoy taking cases to trial and appeal. And we have been successful in helping clients in the overwhelming majority of our cases. (Please keep in mind every case is different. Success rates in prior cases may not be indicative of the odds of success in yours.) Banks and their lawyers know who we are and know the fight we bring to the table. They understand with us a foreclosure is not guaranteed.

We use this reputation and tireless effort to best serve you and to help increase the odds of success. We will take the time to review your situation, discuss your goals, and come up with a plan of action. If you want a principal reduction, then we will do all we can to increase the odds of making that happen. Contact us today at 754-400-5150 or through our online form to schedule a consultation to learn more.

Let the Law Offices of Evan M. Rosen serve you!