Homeowners who have seen their home’s value drop over the past months may have options in dealing with their underwater mortgage through a new FHA short refinance program. Homeowners who might qualify for this program could see a principal reduction on their underwater mortgage and have the opportunity to refinance for an FHA home loan, which could bring a more affordable mortgage interest rate and lower monthly mortgage payment.
Many homeowners who own more on their home than their home is actually worth are obviously in a very difficult financial situation, especially in cases where a homeowner’s monthly mortgage obligation has become problematic due to the loss in property value. Interest rates on home loans are quite low at the present time but underwater homeowners have been unable to refinance for a more affordable mortgage rate and possible mortgage payment since they have negative equity in their home.
Yet, it’s hoped that this new Federal Housing Administration program will bring more options to homeowners in an underwater mortgage situation so that they may make their home loan payment more affordable and avoid foreclosure. However, there have been some concerns over whether this program will be successful due to the fact that mortgage servicers will be required to offer a principal reduction before homeowners may qualify.
Mortgage servicers have been reluctant to offer principal reductions in some cases and since another qualification of this program is that a homeowner must be current on their home loan payments, it’s believed that mortgage servicers may not offer principal reductions in cases where homeowners can still meet their mortgage payment requirements. However, homeowners who may be struggling to stay current on their home loan payments may find assistance through this short refinance opportunity as long as their mortgage servicer will work with them to provide more affordable mortgage payment options.