Banks Resist Lowering Loans by Reducing Principal

From the American Bankruptcy Institute this morning:

Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said yesterday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans, the New York Times reported today. "There's a core problem that if you start to help certain people and don't help other people, it's going to be very hard to explain the difference," said Brian T. Moynihan, the chief executive of Bank of America. "Our duty is to have a fair modification process." All 50 state attorneys general, as well as a host of federal agencies, are pushing for a settlement over investigations into foreclosure abuses by major mortgage servicers that could cost the industry $20 billion or more. Industry experts estimate that nearly a trillion dollars worth of mortgage debt is "underwater," a result of house prices having fallen since the original loans were made. Federal officials hope a settlement with the servicers will help individual borrowers and provide a cushion for the weak housing market.

More information here.