Many homeowners have faced the problem of losing value in their home and as a result there have been those who are left owing more on their home than their home is worth. However, there have been a select few lenders who have offered principal reductions for homeowners who are in a difficult position with their underwater mortgage.
Some mortgage lenders like Bank of America and Citigroup were reported to be working to reduce homeowners’ principal amounts when a homeowner was suffering from an underwater mortgage, but there are more lenders who have been hesitant to offer reductions in mortgage principals. While Bank of America and Citigroup haven’t been the only banks to use principal reductions nor have they offered principal reductions on a wide scale, there are rising requests from homeowners that more be done.
There have been mortgage servicers who have extended a mortgage principal reduction from earned principal forgiveness programs. In some cases, homeowners were offered a reduction in their mortgage principal over time if they continued to make mortgage payments, but this again isn’t something every lender has used.
Mortgage principal forgiveness plans may not be available to every homeowner or in every case of devaluation on a home, but there may be alternate paths a homeowner may take if their underwater mortgage is burdensome. For instance, underwater refinancing opportunities may be available to some from the Home Affordable Refinance Program or a new FHA initiative.
Yet, with home values either still falling in some areas of the nation or slow to recover in others, homeowners and analysts alike feel that more solutions must be presented in the case of underwater mortgages. There are those who feel home prices were inflated and, as a result, the severity of these underwater mortgages is causing a great deal of financial strain on homeowners. Many believe that in order to bring home prices back in line to where they should be, lenders must reduce or forgive mortgage principals on homes where the loss of value has been extreme.