Underwater homeowners may have the opportunity to refinance their home loan and obtain a principal reduction thanks to a new FHA short underwater refinance program. Underwater homes have become a problem for many across the nation as property values have dropped in many areas, causing homeowners to owe more on their home than their home is actually worth.
This has caused numerous homeowners to seek assistance through refinancing opportunities or principal reductions, simply as a way to make their underwater mortgage payment more affordable. While there have been problems with strategic defaults and homeowners simply being unable to meet their mortgage payment obligation after their home has lost a substantial amount of value, programs like the FHA underwater refinancing opportunity are hoped to provide solutions for these troubled homeowners.
The FHA program, however, has many believing that there will be lackluster results since the qualifications for this underwater short refinancing program requires lenders to work with homeowners and the Federal Housing Administration. The FHA short refinance program requires that homeowners be current on their existing mortgage payment, qualify for an FHA loan, have a credit score of at least 500, but many worry that homeowners who meet these qualifications may not find help from their servicers who are required to reduce the homeowner’s underwater mortgage principal.
Also, there is concern over second lien holders who may be unwilling to work with a homeowner even in a case where a primary mortgage servicer may be willing to write down a mortgage principal amount. Yet, this short refinance program from the FHA does have the opportunity to help numerous homeowners as underwater mortgages have become more problematic across our nation. While there are reports that housing prices have climbed slightly in some areas, the underwater problem many homeowners are facing is quite severe and it is hoped that lenders will work with homeowners and the FHA to find affordable solutions for homeowners struggling with an underwater home loan.