Underwater homeowners may have some relief on the way due to an initiative from the Obama Administration, and an expansion on the home loan modification program, that has lenders providing more principal reductions for homeowners.
Many analysts say the housing market is in need of these principal reductions as homeowners are seeing their home’s value drop substantially. However, there are those who feel principal reductions aren’t a fair practice and shouldn’t be given.
Yet, homeowners that are not being offered a principal reduction feel they have little chance of getting any value back in their home, so many are just choosing to walk away from their homes. It is this practice of walking away from a mortgage obligation that the principal reduction plan hopes to stop.
Reportedly, the Obama Administration is asking lenders to form or put into practice programs that would reduce the mortgage principal on underwater homes over time if the homeowner keeps their payments current.
There have been a few trials of principal reductions from lenders and institutions like the FDIC but it is hoped this new principal reduction plan associated with the home loan modification program will provide more results for homeowners who owe more on their home than it’s worth.