You nailed it—principal reduction is like winning the lottery, except you still owe taxes. I’ve seen lenders dig their heels in even when foreclosure is staring them in the face. They’ll try everything else first: forbearance, rate drops, term extensions... whatever keeps the balance untouched. One thing I always wonder though—has anyone ever had luck negotiating a reduction by showing the lender hard numbers on what a foreclosure would actually cost them? I’ve tried, but usually get stonewalled unless the property value is seriously upside down.
I’d also be careful banking on any promises until you get it in writing. Seen too many folks get burned by “verbal agreements” that vanish later. Even with all the paperwork, it feels like you’re one missed document away from starting over.