do lenders ever modify under-water loans?

[sniglet]

I know this is a really basic question, but does anyone know if lenders will modify mortgages on homes that are under-water (i.e. where the mortgage is worth more than the value of the property)? We have been hearing that more lenders are agreeing to modifications these days, but I just don't have a good understanding of what these modifcations entail, and which types of borrowers would be eligible (e.g. do lenders require that there still be equity in the home).

I wonder how many loan modifications are simply re-jiggering of payment terms (i.e. keeping a lower interest rate) vs an actual reduction in the principal owed?

[sniglet]

[Lake Hills Renter]

Or a fat government bailout.

[mukoh]

Loan mods are hard to track unless you are tracking a particular property or an area.

What I see from lenders though is getting the mods into the territory of FHA/FNMA GSE guidelines, thinking that they will take these loans to them.

[sniglet]

[SeattleMoose]

"Or a fat government bailout. "

Luckily for us our elected officials are bright, cannot be bribed, and carefully weigh the long term financial and ethical effects of their every vote. Therefore, I can assure you that they would never do something as stupid as rewarding those who caused the bubble with a "fat bailout" that penalizes all of us financially conservative and prudent folks who played no role in the madness.

I mean we are talking about our public servants, men and women of high ethical and moral values, men and woman who......uh just a minute.....seems they just passed a fat government bailout