Ocwen is offering principal reductions to borrowers who have negative equity in their homes. If the borrower qualifies, the loan will be written down to 95% of the home’s current value. The reduced amount is forgiven 1/3 per year over three years as long as the borrower stays current on payments. But, when the home is ultimately sold the bank will be entitled to a 25% share in the equity at that time.
This is the first principal reduction program initiated by a private lender without the influence of the government.