When it comes to cutting mortgage balances for end customers, the biggest banks have consistently maintained that it was a bad idea. It would be unfair to the mortgage customers that did everything right to remain up-to-date on their payments, and it would create a personal moral hazard that would encourage people to miss payments in search of better terms.

But option ARM loans are apparently viewed differently. Quietly, banks such as JPMorgan Chase and Bank of America--two banks that publicly opposed any sort of mortgage reduction--have been proactively seeking out these mortgage holders and offering them a sweet deal: A reduction in the amount they owe. That allows customers to restructure the terms of their mortgage and keep them viable. It's a real gift, and according to the New York Times, some customers are skeptical. But the offer is real. One woman had her $300,000 mortgage reduced $150,000.

For banks, this is less costly than having the customer fall into foreclosure and then seeking a modification, which has proven to be maddening for both customer and lender. So it looks like the moral imperative surround the personal moral hazard issue is trumped by the reality of costly modifications.

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