Underwater homeowners may have a new option in dealing with their mortgage through the FHA short refinancing program. Many homeowners have struggled with the loss of value in their home over the past months and, as a result, have been met with a difficult situation where they owe more on their home than their home is worth.
However, this new FHA refinancing program is set to allow homeowners with an underwater mortgage the chance to refinance their home loan for a new FHA loan at a lower interest rate, which can make underwater homes more affordable for some. Also, this program would require that a mortgage lender offer a principal reduction, which is something that many underwater homeowners have been asking for over the past months.
Yet, there are those who believe this program may be unhelpful due to the fact that mortgage servicers must write off a portion of a homeowner’s principal so that they can qualify for a new FHA-backed loan. According to some, the FHA short refinancing plan may fail from the beginning due to the fact that many mortgage lenders will be unwilling to write down principles and in cases where a second lien is in place, the servicers may be uncooperative.
On the other hand, other qualifications may benefit underwater homeowners who are simply in a bad situation and see their home as an investment. For example, a homeowner is not required to be in a situation where economic hardship is present in order to qualify for this FHA short refinancing opportunity.
While, again, there is concern that banks will be unwilling to offer principal reductions so that homeowners can qualify for this new FHA-backed mortgage and it is reported that homeowners may be chosen by investors who own mortgage-backed securities before they may enter the program, but it is still early in the life of this short refinance opportunity.
Yet, it’s hoped that this plan will offer homeowners with an underwater mortgage the opportunity to gain a more affordable home loan payment and aid the housing market which has been struggling from devaluation and from homeowners who are suffering from unemployment.