Underwater home loans have been problematic for numerous individuals as housing prices have dropped in various states over the past months. Understandably, homeowners who have faced a loss in the value of their home are in a very difficult position and frustrated with their situation. However, underwater refinancing, principal forgiveness, and alternative assistance plans have been implemented in the hopes of stopping strategic defaults and foreclosures for underwater homeowners.
In some cases, an underwater homeowner is able to make their mortgage payment but, again, is in a difficult position where they owe more on their home than their home is actually worth. Yet, there are homeowners who have specific types of mortgages where the loss in their home’s value has made it difficult for them to make mortgage payments. No matter what position a homeowner is in, concerning their underwater mortgage, servicers have been concerned about strategic defaults that have been used by some homeowners, which have caused a great amount of difficulty for the housing market and financial institutions as well.
While underwater refinancing opportunities from the Home Affordable Refinance Program and FHA short refinancing plans have been offered to numerous homeowners, there are still troubles concerning underwater mortgages that have homeowners willing to simply walk away. While assistance plans like the FHA refinancing program offer principal reductions to some homeowners, and there are reports that some mortgage servicers have offered earned principal forgiveness plans in the past, there are those who feel these measures will not be enough to combat the underwater mortgage problem and homeowners may simply walk away still.
Homeowners may be charged in cases where a strategic default is used, but questions as to why more homeowners are not seeking help from these underwater refinancing opportunities have arisen. While there are homeowners who are looking for assistance for their underwater home loan through these various programs, critics say that underwater refinancing plans may fail overall, especially in cases where servicers are required to reduce a homeowner’s principal.
However, unless affordable mortgage solutions are presented for homeowners who are facing an underwater home loan situation, many believe that strategic defaults may be used by more homeowners despite the adverse effects to their financial life. On the other hand, with various underwater refinancing opportunities available and options like home loan modifications still in play, it’s believed that homeowners with an underwater mortgage can find affordable solutions to their predicament instead of simply walking away from their home loan obligation.