Florida’s key foreclosure prevention program may use a portion of its $1 billion to pay down mortgage principal amounts for struggling homeowners, a controversial tactic that critics believe leads more people to default on their loans.

The Florida Housing Finance Corp., which oversees the federally-funded Hardest Hit program, is considering a plan that would reduce mortgage debt on home loans for an estimated 2,000 underwater borrowers as a way to stave off bank repossession.

The plan, as described at a board of directors meeting this month, would partner the corporation with the non-profit National Community Capital group to cut principal balances enough to leave borrowers with 5 percent equity in their home.

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Read  “Principal reductions may be paid for by Hardest Hit Fund” by  The Palm Beach Post.