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Mortgage Principal Write-Downs Lagging Even With States Paying

When Javier Gonzalez saw that the value of his Hawthorne, California, townhouse had fallen below what he owed on his mortgage, he decided he had three choices. He could make payments he might never recover, walk away from the loan, or get his lender to reduce his principal.

When Gonzalez, 39, a communications consultant who bought the home for $450,000 in 2007, had no luck with his bank, he decided it was a bad investment. He stopped making payments and moved out in October 2009.