Traditionally, the more you put down the easier it was to get a loan. If you had 50% to put down, you could be an unemployed ax murderer just released from prison that morning, the bank would do the deal with you.
As a matter of fact, they hoped you would default on the loan. They kept the money and resold the property on the low side of market value. Great deal for the bank.
What's changed? There is such a glut of homes on the market, not just foreclosures but also regular people simply trying to sell, that when and if the bank forecloses they can't sell it either, at almost any price. They merely join the queue of desperate sellers.
The banks are still not admitting this; not to homeowners who they're still threatening with foreclosure, and in some ways, not to themselves. Whether it's by adjusting the terms and/or interest of the original loan, or even the IMO outrageous idea of adjusting the principal, they've got to come up with an alternative to foreclosure. Not so much because of their "Love of Mankind" (ha-ha-ha) but for their own survival.
