Reducing the amount struggling homeowners owe on their mortgages is proving to be a more effective way to prevent foreclosures than other methods, such as reducing interest rates or postponing payments, according to Amherst Securities Group.  That brings the home’s value near market value, so borrowers do not fall behind on payments & lose their homes.  Only 12% of borrowers who receives principal reductions re-defaulted in 2011, compared to 23% who received interest rate reductions (but NO principal reduction) & 30% who received forbearance, which postpones their debt repayment.  In many cases homeowners are no longer hopelessly underwater.  Loans backed by Freddie Mac & Fannie Mae are NOT included, but could change as the Federal Housing Finance Agency, who controls the majority of outstanding mortgages through its oversight of Fannie & Freddie, has thus far prohibited the mortgage giants from including debt forgiveness as part of their mortgage modifications, as considered unfair.  Uncle Sam could help with these loans, but conplicated & more to come.