Homeowners who are struggling with an underwater mortgage have sought a principal reduction in their home loan so that they may be able to obtain a more affordable home loan payment or, for those who view their home as an investment, be able to profit from a sale in the future. While underwater mortgages are a frustrating situation, there has been hesitation on the part of many lenders to offer this type of mortgage assistance to homeowners with an underwater mortgage.
A hearing on the home loan modification program took place recently and the top lenders in the Making Home Affordable Program were present to speak on their participation with homeowners and the modification assistance plans. While many of the lenders stated they are willing to use principal reductions to help homeowners, it seemed that lenders were unwilling to use principal reductions on a wide scale.
Many stated that while principal reductions can be helpful, they do not represent an across-the-board solution for homeowners who are struggling with an underwater mortgage. In cases where a homeowner is either having difficulty making their home loan payment or they are in an area where they have lost value in their home and that loss is unlikely to be recouped, a principal reduction may be warranted.
Yet, if a homeowner has a mortgage with a lender who feels that principal reductions are not something to be widely used, there are other ways in which an underwater mortgage can be handled. For instance, homes owned or guaranteed by Fannie Mae or Freddie Mac may qualify for underwater mortgage refinancing opportunities, which would allow homeowners the chance to get a more affordable home loan payment on their current underwater mortgage.
While the use of principal reductions varies from lender to lender, it’s still being advised for homeowners who owe more on their home than their home is worth to talk over assistance options with their lender and ask about ways they can make their underwater mortgage payment more affordable. Lenders, as well as the Making Home Affordable Program website, have information that may be helpful for homeowners who are struggling with an underwater mortgage and are looking for a solution.