Principal Reduction Programs Available For Underwater Mortgages But Are They Being Used?

Many homeowners with an underwater mortgage are finding that a principal reduction is about the only thing that can make their home worth keeping.  While many homeowners may be looking to sell their home at a loss or some may be willing to ride out the decrease in value, there are more and more homeowners looking to just simply walk away.

Principal reductions are one of the few things that homeowners who are looking to walk away will consider.  Homeowners that are looking at a mortgage far more than the value of their home feel they are not going to get any profit out of their home in the future as it could take years for the previous home price to be reached once again.

While some homeowners are worse off than others, lenders have been slow to enact principal reduction plans and the FDIC is currently testing a few programs for principal reduction to bring what homeowners owe on a home more in line with the market value.  While principal reductions aren’t a big priority for banks, since they lose money on the deal, many others feel that having their mortgage principals reduced is catering to homeowners.

There are many homeowners with an underwater mortgage that just want an affordable payment and know that a rise in housing prices was no guarantee when they bought the home.  Yet, other homeowners that have seen drastic drops in their home’s values, due to what many feel is the result of inflated home prices, saw their home as an investment and are choosing to just leave the house and mortgage no matter the consequences.

Principal reductions can help homeowners by making their home more affordable or by giving them a light at the end of a long financially troubling tunnel.  However, as to if this practice is fair or if it will stop underwater homeowners from walking away from their mortgage remains to be seen.