A new assistance plan from the Federal Housing Administration may help homeowners who are struggling with an underwater mortgage obtain a more affordable home loan agreement. Homeowners who owe more on their home than their home is worth are obviously in a troubling situation as some are finding it difficult to meet their mortgage payment due to the decrease in their home’s value.
However, the FHA short refinance program may allow homeowners in an underwater mortgage situation to refinance their home loan to a lower interest rate, which could make their mortgage payments more affordable and allow them to avoid further complications from an underwater home loan. Essentially, homeowners who are current on their mortgage payments may qualify for this FHA short refinancing plan and could receive a principal reduction as well.
One of the qualifications of this FHA program is that mortgage lenders must write down a percentage of a homeowner’s principal amount in a case where a homeowner is underwater. Ideally, this short refinancing program will allow underwater homeowners to receive a principal reduction, a cheaper mortgage interest rate, and a more affordable home loan payment since they will be able to refinance to an FHA-backed loan.
There are those who believe this program may be destined for a lackluster future due to the fact that primary mortgage servicers will have to forgive a portion of a homeowner’s principal and, in cases where a second lien is in place, there could be further difficulties to overcome. While dealing with these mortgage servicers and investors of mortgage-backed securities could be problematic, it is hoped that in areas where underwater mortgages have become problematic and homeowners are in need of assistance, this FHA short refinancing program will provide options that will stabilize housing conditions in areas where the loss in property value has been severe.