Principal reduction plans may be available for some homeowners who are struggling with an underwater mortgage. While the lenders who offer these options may vary, the Making Home Affordable Program has been asking lenders to provide reductions in mortgage principles for those who are severely underwater.
Some lenders are hesitant to use principal reductions on a wide scale but believe that homeowners who are in an area where they are unlikely to recoup any of the value they have lost in their home or who are struggling to make their mortgage payments because of a loss of value in their home should be able to qualify for a mortgage principal reduction plan.
Again, some lenders are using this method more than others so it will be dependent upon the homeowner’s mortgage lender and situation as to whether they can qualify for a principal reduction on their home loan. Some homeowners that may not qualify, obviously, are frustrated with their situation and have even walked away from their home altogether.
There are alternatives to mortgage principal reductions, like short sales, that can help a homeowner alleviate an underwater mortgage burden. Short selling can hurt someone’s credit score but this is a far more beneficial alternative than simply walking away from an underwater mortgage.
Homeowners are being advised to talk with their mortgage lender about principal reduction plans or underwater mortgage assistance options. It’s understandable that homeowners with an underwater mortgage are frustrated but there is help available so walking away from a home loan shouldn’t be an option.