BUSINESS

Loan Modification: Banks Finally Agree To Reduce Principal For Borrowers

12/01/2009 05:12 am ET | Updated May 25, 2011

Banks and loan investors are starting to bite the bullet and lower the principal due on home mortgages for some struggling borrowers, a new report from bank regulators shows.

That's good news for some homeowners, but may portend more write-offs over the next few years for banks and other lenders now wading through hundreds of thousands of applications for loan modifications. The tradeoff for banks is that by taking the hit now they can boost their chances of being repaid.

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