Simply put, they’re NOT happening.  At least not to the tune of anything that would make sense for a homeonwer in Jumbo-land.  In a small neighborhood in Southern California those who bought during boomtime paid as high as $1,700,000.  Many who bought these homes brand new at the start of the boom at 1/2 that price still took out high equity loans and are now upside down.  For most a loan modification with a permanent principal balance reduction on average of $400-600k would be the minimal amount for it to make sense.

Here’s a good link to the details regarding the Making Homes Affordable Plan.

http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf

Page 3 is especially important to read if your 1st loan balance is greater than $729,500.  Although under this plan, homeowners with balances higher than this amount cannot qualify.  The bank that your mortgage is with may possibly do a principal reduction, however as stated above, they’re not reducing balances by any near enough for it to truly make sense.  $100k principal reduction when current fair market value says it should be reduced by $400-600k just isn’t helpful.

Solution:  Short sale your home.  Wait 2yrs or less, then buy again,  in the same neighborhood & then hold a block party to celebrate that your mortgage is $600,000+ less than it was before!

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