Homeowners who may have negative equity in their mortgage could qualify for underwater home loan refinancing and principal reduction plans. While it has been reported some mortgage servicers have offered earned principal forgiveness plans for homeowners who continue making underwater mortgage payments, the FHA recently launched a short refinancing program and opportunities for refinancing from programs like the Home Affordable Refinance Program have also been set in place to assist underwater homeowners.
Understandably, many mortgage servicers are unwilling to offer principal reductions on a wide scale and some have claimed they feel principal reductions are not helpful for underwater homeowners. Yet, homeowners who are struggling to make their mortgage payments as a result of a decrease in their mortgage value have been in need of foreclosure prevention assistance plans which can be tailored to underwater homes.
The FHA short refinance program has offered some a solution to these problems as homeowners may be able to refinance their underwater mortgage for a more affordable rate and payment, and receive a principal reduction as well. However, a principal reduction, again, must be granted by a servicer, and this is where many feel programs like the FHA underwater refinancing program may struggle.
Also, the Home Affordable Refinance Program could help homeowners with Fannie Mae or Freddie Mac find affordable solutions to their underwater mortgage difficulties. While homeowners who qualify for this program may have more success, according to some, than those who are relying on their mortgage servicers to offer principal reduction through the FHA refinance program, not all homeowners have a home that is owned or guaranteed by Fannie Mae or Freddie Mac.
Underwater mortgage principal reductions and refinancing plans may not be available to all homeowners, but it’s hoped that programs like these can offer more affordable monthly mortgage payments to homeowners who have seen their property value drop over the past months.