While some people feel that home prices are on the rise, there are still many homeowners who are left with an underwater mortgage as they have seen their home’s value drop so substantially that they now owe a great deal more on their home than their home is actually worth. The Obama administration has proposed a principal reduction plan that would help homeowners who are in an underwater mortgage situation.
While the Obama principal reduction plan has not fully taken effect and many lenders feel that principle reductions are not the best way to deal with widespread underwater mortgages, there are some exceptions where a homeowner may be able to talk with their lender and get their mortgage principle reduced.
Lenders who are objecting to the use of widespread principal reductions say that there are a few instances where they feel a principal reduction is warranted. For instance, some lenders like Wells Fargo have stated that in a case where a homeowner is having trouble paying their mortgage payment due to the decrease in their home’s value, a mortgage principal reduction may be in order.
Also, homeowners that are in an area where they have seen a decrease in their home’s value and are unlikely to recoup any of the value that was lost maybe in line for a principal reduction as well. However, despite hesitation on the part of some lenders, there are assistant options available for underwater homeowners outside of principal reductions.
The Making Home Affordable Program and in-house principal reduction plans available through many lenders may be able to help some struggling homeowners. Despite troubles with the Making Home Affordable Program and lenders, homeowners are still being advised to contact their mortgage lender to talk over options if they are in an underwater mortgage situation.
Options that range from principal reductions to short sales may be available for homeowners that owe more on their mortgage than their home is worth. However, homeowners should know that there may be cases where lenders are unwilling to help a homeowner, as many feel that a loss in a home’s value is part of the gamble homeowners took when they signed their mortgage. Lenders are willing to offer assistance for homeowners, but there are some cases where lenders are saying that the homeowner must deal with the loss of their home’s value since an increase was never guaranteed.