Lenders, Underwater Mortgages And The Problem With Principal Reductions

With many homes losing value across the nation there has been an outbreak of underwater mortgages that are causing homeowners to struggle to meet their mortgage payment or have simply grown frustrated with owing more on a home than the home is worth. Many homeowners have been asking for principal reductions, but lenders have been hesitant to provide this type of mortgage assistance in that they feel there are problems with principal reductions in general.

Principal reductions, essentially, lower the original amount owed on a mortgage, the principle, and it makes a homeowner’s mortgage more affordable in some cases, or a homeowner who can afford their mortgage is simply given peace of mind since they know that they no longer are paying money on a home that has lost a substantial amount in value.

While not all lenders are opposed to principal reductions there are those who believe that using principal reductions on a wide range of homes is not practical, fair, and is simply something that should not be practiced. Some lenders who are against principal reductions have said that in cases in which a home is in an area where housing prices have taken a big hit and are unlikely to regain their value, a principal reduction may be in order.

However, many lenders feel that principle reductions simply go against the entire mortgage process and stacks the deck in favor of homeowners, as homeowners whose home gains value are not subject to having their mortgage principle increased so that they own more money to their lender.

Homeowners want solutions for their mortgage principal troubles and many banks are offering alternates to principal reductions as a means of assistance for homeowners whose homes has lost value. Anyone who is having trouble with an underwater mortgage is still being advised to contact their lender because there are mortgages options available in these cases, yet they may not come in the form of principal reductions.