Bank of America is now going to do principal reduction - up to 30% it seems. There is some carrot/stick approach that seems interesting. Nevertheless, I could see people that live within their means get upset over this. Whether BoA is giving in to pressure from the current administration or just taking a business decision remains to be seen.
http://www.usatoday.com/money/economy/housing/2010-03-24-bank-of-america-mortgage-cuts_N.htm
One thing is clear - it is a better time than ever to buy a home. In an up market make sure you cash out all your available equity. Then, when the market goes down just wait for the principal reduction or do a strategic short-sale or foreclosure. I mean, why should the greedy banks get any of your money?
The hit to your credit score? No worries - the government will deal with those pesky and abusive credit report companies and make sure they don't allow someone to discriminate based on your credit worthiness.
Ah, wonderful times ahead!
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