It is a relatively new idea that most people have not heard about. In short, it is a modification of a borrower’s current loan where principal is reduced to current market value. The catch? If and when the borrower sells the property, the bank or mortgage company that wrote off principal is entitled to a share of the increased value of the property. The goal is to encourage banks to write down principal on loans while getting some later consideration. The idea probably won’t go far but expect to see it discussed in the coming months as HARP rolls out and some borrowers are still left out.
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