WTF? Why would we want to bail out people who were abusing their HELOCs after the property crash? Have we learned nothing? Are houses and HELOCs truly free money?

Are principal reductions on their way? Some form of it might be. Who will get the free money coming?

CoreLogic (NYSE: CLGX), a leading provider of consumer, financial and property information and business services, reported today that the current residential shadow inventory as of January 2011 declined to 1.8 million units,representing a nine months’ supply.

The five biggest US mortgage servicers were told this week at a private meeting with regulators to consider paying delinquent borrowers up to $21,000 each as part of a broader settlement of the foreclosure crisis.

We’ve long speculated that a renewed decline in housing prices would force Washington to pull out it’s big gun: requiring banks to reduce principal balances on mortgage loans.

A looming settlement over abuses in mortgage servicing is just the excuse needed for Washington to demand such drastic measures.