Obama Underwater Mortgage Assistance—Can Short Sales Only Work If There Is Principal Forgiveness?

Underwater mortgage homeowners have been looking to resale more and more over the last few weeks and reports say that short sales are up.  However, many homeowners are worried that short selling could still cost them even if they happen to sell their home.

Yet, new incentives from the Obama Administration are making it easier for lenders to profit from short sales and help homeowners move on from their underwater mortgage.  There have been cases where there was no principal forgiveness, which makes a short sale pointless, but these new incentives for lenders hopefully will get rid of this problem.

Primary lenders, or first-lien holders have been willing to short sell in the past, but homes with second liens were not having such an easy time as short selling often led to the second lien holder losing out.

However, there are cash incentives to lenders, both primary and secondary, that have been moving short sales along and allowing underwater homeowners to move on from their home.  Remember though, if you are looking to short sell your underwater mortgage, be sure you are getting the principal forgiven otherwise you will still owe your lender.

Many homeowners have had no trouble in this area, but make sure that you have paper proof that your principal will be forgiven if you sell short.