Homeowners who have seen their home value decrease over the past months and are now facing an underwater mortgage situation have, obviously, become very frustrated with their predicament. However, homeowners who owe more on their home and their home is actually worth may be able to refinance their mortgage under the Home Affordable Refinance Program, if their home loan is owned or guaranteed by Fannie Mae or Freddie Mac.
Many underwater mortgage homeowners have been seeking principal reductions from various lenders across the nation, but many are hesitant to offer this form of assistance for a number of reasons. For starters, principal reductions on homes that have lost value are unfair in cases where homeowners can still meet their monthly mortgage payment, despite having an underwater mortgage. Also, many lenders say that homeowners are in a win-win situation with principal reductions since those who have kept value in their home and profit from the sale of their home keep the money they make. Essentially, homeowners and lenders against principal reductions say that no home is guaranteed to increase in value and homeowners take this risk when they buy.
Yet, in some situations, an underwater mortgage is making it difficult for a homeowner to meet a monthly mortgage payment. Also, homeowners have strategically defaulted on their home loan, meaning they simply walked away from their mortgage obligations due to the value that they lost in their home being so substantial they felt they could not recover. However, homeowners who are able to qualify for this underwater mortgage refinancing can get a more affordable home loan payment on their underwater mortgage, meaning they can keep a roof over their head.
While lenders outside of Fannie Mae and Freddie Mac have various ways which they can deal with underwater mortgages, this Home Affordable Refinance Program is able to benefit many homeowners by allowing them to refinance their home loan to a more affordable monthly mortgage payment, or even a lower interest rate, so that they can continue to afford their home despite the fact that its value has decreased. Homeowners can contact their lender or consult the Making Home Affordable Program for additional information on this refinancing option, but it needs to be understood that not every underwater mortgage homeowner will benefit or qualify for this type of aid.
Yet, there are options which homeowners can use to avoid losing their home or defaulting. Short sales are available for some homeowners who want to be rid of their underwater mortgage and deed in lieu of foreclosure plans are available for homeowners simply cannot afford their home any longer but wish to avoid the foreclosure process.