Home values have been a problem for many as late due to the fact that homeowners have seen a decrease in the worth of their home and are stuck in an underwater mortgage situation. Homeowners who owe more on their home than their home is worth typically fall into two categories, one being homeowners who are having trouble paying their mortgage due to the decrease in their value and need a way to keep a roof over their head and others who see their home as an investment and want a principal reduction or the opportunity to be free of their underwater situation.
Mortgage principal reductions have been asked for by many homeowners but there are certain lenders who are not using this form of mortgage aid on a wide scale. While many of the nation’s top lenders, specifically those in the Making Home Affordable Program, have stated that there are cases where principal reductions may be warranted, again, not every homeowner who has lost value on their home deserves a reduction in their principal value, according to these lenders.
Some institutions like Bank of America, Citigroup, Wells Fargo, and J.P. Morgan Chase have been reported to offer principal reductions, some of these institutions may do so only on a limited number of homes in certain areas or may avoid principal reductions altogether due to a variety of factors. While there are homeowners who believe principal reductions are unfair since there is no guarantee that a home will increase in value and those who have lost value in their home simply must accept that fact and go forward, there are others who say that home prices were inflated when these now underwater homes were sold.
Principal reductions are usually at the discretion of one’s mortgage lender, and for this reason homeowners are told to contact their home loan servicer to talk about underwater assistance plans. Yet, there are alternative options for some if a principal reduction is not available.
Many homeowners have entered into a short sale agreement with their mortgage lender so that they can be free of their underwater mortgage obligation. Alternatives like short sales have been offered to prevent homeowners from walking away from their home loan, which is both detrimental to lenders and a homeowner’s credit score.
While principal reductions are still being sought out by many homeowners, there are alternatives like short sales or underwater refinancing that can help homeowners who either want to keep a roof over their head and make their underwater mortgage payment more affordable, or homeowners who simply want a way to be free of a home that has lost a substantial amount of value.