Homeowners who are facing an underwater mortgage may have help available through various underwater mortgage assistance programs. The Obama Administration and the Making Home Affordable Program have been using various plans through lenders to make underwater mortgage assistance available to homeowners who are struggling. Some homeowners have been able to obtain a principal reduction on their underwater home loan, others have been afforded refinancing opportunities on a home that has lost value, while some homeowners have taken advantage of short sell options that were offered.
Principal reductions are not a widely used means by many lenders as there is a lot of backlash that can come from offering this type of assistance on a wide scale. Homeowners who have lost value in their home and can still pay their mortgage are often angry that some homeowners are obtaining principal reductions even when these homeowners are having trouble affording their mortgage payment. Also, homeowners who were lucky to avoid seeing a decrease in their home’s value are also crying out against principal reductions since many of these homeowners and lenders alike feel that there is no guarantee that a home’s value should increase and homeowners simply have to deal with their loss and not be given special treatment.
However, some homeowners argued that their homes were overvalued and, as a result, principal reductions are only fair. Yet, homeowners who may have a home loan with Fannie Mae or Freddie Mac might be able to take advantage of underwater refinancing opportunities. The Home Affordable Refinance Program was offered to homeowners who have a home loan that is either owned or guaranteed by Fannie Mae or Freddie Mac and, in an underwater mortgage situation, may be able to refinance their home for a more affordable monthly payment.
Yet, a third route that many homeowners have taken is short sales. Homeowners have been able to escape their underwater mortgage trouble by short selling their home and simply moving on. Many homeowners have been able to sell their home for less than its mortgage value, and lenders have forgiven the remaining balance. One reason many lenders are allowing for short sells to take place is that many homeowners have walked away from their home, which causes trouble for both homeowners and lenders, and mortgage servicers do not benefit when a home goes through foreclosure.
Another way that homeowners have been dealing with underwater mortgages or avoiding foreclosure is by participating in a deed in lieu of foreclosure plan. Some homeowners have lost value in their home or simply can no longer afford to make their payments and, when they surrendered the deed to their home, servicers will allow them to avoid foreclosure process, which helps avoid damage to their credit history and score.
Underwater mortgages are obviously a troubling situation that many homeowners are having to face. However, if homeowners have lost a significant amount of value in their home loan and fear that difficulty in making their mortgage payments will soon follow, it’s advised that these homeowners contact their mortgage lender or consult the Making Home Affordable Program website early so as to quickly gain a hold on their mortgage troubles.