Homeowners with an underwater mortgage are in a very frustrating situation and it is understandable that some have grown so angry with owing more on their homes than their home is worth that they have simply wanted to be rid of their home altogether. The problem is some homeowners have just walked away from their mortgage, using what is termed a “strategic default,” which can cause a lot of damage to homeowner’s credit score and history.
The Obama administration has been prompting lenders to offer principal reductions and short sale options for homeowners who have an underwater mortgage and may have a small likelihood of recouping any of the value that they lost in their home. Some homes are in an area where it is unlikely they will regain value so a principal reduction or short sales are being sought by homeowners who see their house as an investment in which they have lost out.
While not all lenders are using principal reductions and there have been problems with short selling homes when a second lender is involved, there have been incentives offered for lenders who help underwater homeowners with short sales. Homeowners with an underwater mortgage will, obviously, do a great deal of damage to their credit score if they simply default. There are reports that say a homeowner may have to wait up to eight years or longer in order to qualify for another home loan if they default on an underwater mortgage.
There are no guarantees with short sales or principal reductions, but in light of the fact that many homes across the nation have lost a substantial amount of value, lenders may be more willing to work with a homeowner that has lost value on their home. It’s been advised that underwater homeowners talk with their lender and ask about options that may be available for dealing with an underwater mortgage. Again, principal reductions are not available from every lender or in every case, but there or underwater aid options available.