Certain homeowners may be eligible for a new Federal Housing Administration underwater refinancing plan, which is set to help homeowners who may be suffering from an underwater mortgage and in need of a more affordable mortgage payment. The FHA short refinancing plan may also provide principal reductions for homeowners who qualify for this program and have a mortgage servicer who is willing to work with them to find a solution for their underwater mortgage problem.
Homeowners who qualify for the FHA’s short refinancing program may be able to refinance their underwater home loan for a more affordable mortgage interest rate, which could make their mortgage payment more affordable and they can also get a reduction on their mortgage principal from their servicer. While this underwater mortgage refinancing opportunity may be helpful for homeowners who have been current on their mortgage payments but are still in a bad situation, there are concerns over whether mortgage servicers will participate.
One of the requirements of the FHA underwater refinancing program is that mortgage servicers must offer a principal reduction in the hopes that a homeowner can cut their underwater mortgage costs, which will offer an even more affordable home loan payment if homeowners are able to refinance through this underwater refinancing opportunity. Yet, principal reductions have not been widely used by many mortgage servicers and it’s believed that this could pose a problem for this FHA underwater refinancing opportunity.
However, homeowners who have seen a loss in the value of their home and who can take advantage of this program will, obviously, benefit from the FHA refinancing program by receiving a more affordable mortgage. Understandably, many homeowners with an underwater mortgage would like to refinance for a lower interest rate and more affordable monthly mortgage payment but negative equity in their home has prevented traditional refinancing. Yet, if mortgage servicers will get behind this program and aid homeowners who are underwater, mortgage solutions may be presented that could prevent delinquencies or defaults in underwater home loan situations.