Underwater Home Loan Refinancing And Principal Reduction Alternative Plans From Making Home Affordable Programs

Underwater home loan refinancing options may be available to homeowners with some of the nation’s top lenders like Bank of America, Citigroup, Wells Fargo, J.P. Morgan Chase, or GMAC Mortgage/Ally Financial. Participants in the Making Home Affordable Program have had difficulty when dealing with underwater home loans and, as a result, underwater home loan refinancing opportunities and principal reduction alternative plans have been proposed through HAMP.

While not all homeowners may be able to take advantage of these opportunities, it’s hoped that more underwater mortgage solution plans can stop foreclosures which are related to homeowners being unable to meet underwater mortgage payments.

For example, a plan which is hoped to take effect in the fall of 2010 is the Making Home Affordable Principal Production Alternative. Numerous underwater homeowners feel that they can benefit from a principal reduction, which could help with the trouble they may be having associated with owing more on a home than the home is actually worth. Servicers may offer a principal reduction to homeowners who are in an underwater situation, but many worry that since this principle reduction will be at a servicer’s discretion, there could be difficulties that arise.

Some financial institutions have stated that they feel principal reductions are not successful in helping underwater homeowners find a more affordable mortgage payment option, but there have been cases where some mortgage servicers have allowed homeowners to participate in earned principal forgiveness programs, which allows for the forgiveness of a percentage on a homeowner’s principal if they continue making their monthly mortgage payment obligation.

However, more homeowners may have the opportunity to refinance their underwater mortgage for a more affordable rate and payment. Usually, homeowners who are having difficulty making mortgage payments due to an underwater mortgage have sought out refinancing as a way to lower their costs, but with negative equity in their home traditional refinancing may not be available. However, according to the Making Home Affordable website, the Home Affordable Refinance Program may aid homeowners by replacing adjustable rate mortgages with fixed-rate mortgages, among other things, by offering underwater refinancing plans to meet an underwater homeowner’s mortgage payment needs.

While there are some positive reports that indicate housing prices may be on the rise in certain areas across the nation, many homeowners are still fighting the battle with negative equity in their home. For some, walking away or short sale options have been used, but homeowners who simply wish to obtain a more affordable payment on their home are hoped to find refinancing solutions through these various programs set in place to address underwater mortgage troubles.