Homeowners that have an underwater mortgage may want to look into their principal reduction options from their mortgage lender. The Obama Administration has asked lenders to start making principal reductions on homes with underwater mortgages in the hopes that homeowners will stop walking away from their mortgage obligations.
All lenders haven’t embraced principal reductions and they are unpopular in many circles. Some say that principal reductions are unfair as homeowners are given no guarantee that their home’s value will increase or they will be able to sell it for a profit, but it is those very homeowners that are looking at their home as an investment that are walking away from their homes.
However, principal reductions are hoped to stop this practice as some underwater mortgages have lost so much value, compared to the amount still owed on the mortgage, that it is laughable. Homeowners asking for underwater mortgage principal reductions were sold a house with an inflated price, in most cases, and these homeowners now feel justified in asking for a principal reduction.
Again, while not all lenders are on board with these principal reductions and there is sure to be problems between lenders and homeowners, it should be known that there might be help for underwater homeowners in the form of a principal reduction from their lender.