Homeowners who have a mortgage balance which is more expensive than the value of their home are often in a very difficult situation for a number of reasons. Some homeowners with an underwater mortgage may view their home as an investment and, as a result, see themselves stuck in a losing situation, while other homeowners may have difficulty paying their mortgage from month-to-month due to the loss of value in their home.
Yet, there are some underwater mortgage assistance plans available that could help certain homeowners find a more affordable home loan payment. Underwater refinancing plans have been used through some programs, in the hopes of helping underwater homeowners avoid the loss of their home to foreclosure or deter homeowners from strategically defaulting.
Programs like the FHA’s short refinance program and the Making Home Affordable’s underwater refinancing plan have offered more affordable mortgage payments to underwater homeowners and, in some cases, even principal reductions. While there are reports that some mortgage servicers may have offered or could offer principal reductions in certain cases, this is usually an uncommon occurrence.
However, underwater home loan refinancing plans are potentially a viable option for homeowners in an upside down mortgage situation, but there are critics who say that when lenders must lower mortgage principles or second lien holders must forgive principal balances as well, these programs are likely to fail.
There have been homeowners who were able to refinance an underwater mortgage but were required to put money towards their principal when they refinanced, however this is not an option for all homeowners. Yet, it’s hoped that with current housing problems and widespread foreclosures, more servicers will work with homeowners to implement these underwater refinancing programs and offer more affordable solutions in areas where homeowners have lost a substantial amount of value in their property.
Some reports indicate that home prices are on the rise in certain areas, but there are homeowners who have seen such a decrease in the value of their home that it is unlikely to return in the near future. In those cases, homeowners who either want a lower principle or a more affordable monthly mortgage payment may have opportunities through these underwater assistance plans, but again, not every homeowner with an underwater mortgage may qualify for these types of aid.