Many homeowners are struggling with an underwater mortgage, meaning they owe more on their home than their home is worth. This is obviously a frustrating situation and homeowners have been looking for solutions and assistance, but some have grown so angry or have become so hopeless that they simply walked away from their mortgage obligation.
The Making Home Affordable Program has plans that are set in place or soon to begin so that homeowners may find solutions to their underwater mortgage problems. Plans like principal reductions or the Home Affordable Refinance Program are hoped to make underwater mortgages more affordable and bearable.
Some mortgage lenders are willing to use things like principal reductions but other mortgage lenders feel that principal reductions are not something that should be widely used. Homeowners that owe a substantial amount more on their home than their home is worth want these principal reductions so that they may be able to either sell their house for profit in the future or at least recoup the value of their home and not pay on such a high mortgage attached to a lower valued home.
Lenders who are unwilling to use principal reductions do offer alternate programs to help homeowners that may be struggling. It seems that homeowners who can pay their mortgage may not be in a position where lenders are willing to provide principal reductions or assistance, as lenders are worried more about homeowners whose underwater mortgage is making it difficult for them to afford their home or refinance their home for a lower mortgage rate.
Some lenders believe that principal reductions should only be used where homes are unlikely to regain the value that was lost or in cases where homeowners can’t pay their mortgage as a result of their home losing value.
However, homeowners with underwater mortgages are still being advised to contact their lenders about options available for homes that have lost a substantial amount of value. While homeowners might not get a principal reduction per se they may be able to obtain other options that can assist them in their underwater mortgage.