Underwater homeowners in New York state may soon have a new way to reduce the principal on their mortgages.

The New York State Department of Financial Services has proposed regulations that would allow banks and mortgage servicers to reduce the outstanding principal on home loans in exchange for stakes in increases in the homes' market value. Investors' share in the appreciation of home prices would be restricted to the lesser of two options: half the increase, or the amount of the principal reduction plus a related-interest calculation.

Borrowers who do not qualify for other federal and private foreclosure-prevention programs would be eligible for the shared-appreciation program, according to a press release Tuesday from the department.

"For many homeowners and investors, this innovative approach to mortgage relief could prove to be a win-win," New York Gov. Andrew Cuomo said in the release. "First and foremost it will help keep more families in their homes and out of foreclosure, while at the same time reducing potential losses for investors. That's good for homeowners, good for local neighborhoods and good for the long-term strength of the housing market."

The proposed regulations will be open for public comment for 45 days, according to a department spokesman.

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