The Obama administration has proposed a principal reduction plan for homeowners who are in need of mortgage assistance and many hope that, while current principal reduction plans in place can help homeowners, a principal reduction plan from the Making Home Affordable Program, set to take full effect in the near future, will help more homeowners keep their home.
Underwater mortgages have been a big problem as of late as home prices have fallen across the country. The severity of some home prices that have dropped has been so great that homeowners, in some areas, may not be able to regain the value that was lost in their home anytime in the near future or possibly while they own their home.
Some lenders believe that principal reductions should not be widely used among lenders as there are complications associated with making principal reductions and it’s unfair to certain homeowners and lenders as well. Principal reductions can be quite complex as it’s not as simple as a lender dropping the mortgage principal on a particular home.
Lenders have said that there are cases where principal reductions may be used and even lenders who are against principal reductions in general believe that areas where a homeowner is unlikely to regain value that was lost in their home or in cases where a homeowner is struggling to make their mortgage payment as a result of a loss of their home’s value may deserve a principal reduction.
While the Obama administration’s principal reduction plan is set to be an option for homeowners soon, there are lenders that offer in-house principal reduction programs to assist struggling homeowners as well. Those lenders who are against principal reductions have alternate plans to provide mortgage aid.
Despite the inconsistencies with principal reduction plans and lenders, homeowners are still being advised to contact their mortgage lender if they are struggling with an underwater mortgage so that they can see what options and plans might be available to help make their home more affordable.