Underwater Home Loan Mortgage Refinancing And Principal Reduction Plans Discourage Strategic Defaults

The devaluation in many homes across the nation have caused homeowners to become incredibly frustrated when they owe more on their mortgage than their home is actually worth. An underwater home loan has been a problem for numerous individuals across the nation and, in some cases, has become so burdensome that homeowners have decided to strategically default on their home loan rather than meet these costs.

However, strategic defaults can cause a great deal of trouble for a homeowner’s personal finances and, obviously, can create difficulties for financial institutions and the housing market as well. In the hopes of discouraging strategic defaults, underwater home loan refinancing opportunities and principal reduction plans have been made available in certain areas and to some homeowners.

Assistance plans like the Home Affordable Refinancing Program and the FHA short refinance program have allowed some homeowners to lower the cost of their underwater mortgage and find more affordable payment solutions. While some homeowners have simply sought a principle reduction, many mortgage servicers have been unwilling to drop principal amounts on home loans.

Some financial institutions have offered earned principal forgiveness programs, and along with refinancing opportunities from plans like HARP and the FHA refinancing program, underwater homeowners have been able to find relief from their mortgage situation. Yet, reports have stated home values have begun to creep upward in certain areas, but homeowners are still in a difficult position in many instances.

While there are critics of these underwater refinancing programs who state that in cases where a mortgage servicer must reduce a mortgage principal underwater solutions may be difficult to find, it’s hoped that more financial institutions will work with underwater homeowners to provide aid.  Understandably, homeowners with an underwater mortgage are in a bad position, but strategic defaulting can cause more problems in the life of a homeowner than owing more on their home than it’s worth.