Underwater Mortgage Principal Reduction Alternative Plan May Bring More Affordability To Troubled Homeowners

Homeowners who have seen decreases in the value of their property may have trouble meeting their mortgage payment obligation depending on the type of mortgage they may have. While there have been programs offered which may help homeowners who are in a difficult position due to having an underwater mortgage, the Principle Reduction Alternative program may be beneficial to homeowners in certain areas who have seen their home’s value decrease.

The Principal Reduction Alternative Program, which is an extension of the Making Home Affordable Program is hoped to provide homeowners with negative equity the opportunity to see a lower mortgage principal offered due to devaluation trouble.

While there have been some financial institutions that have offered earned principal forgiveness programs, there are critics who feel that any principal reduction plan, like the FHA short refinance plan, will most likely be met with lackluster success since principal reduction must be offered through mortgage servicers.

This Principle Reduction Alternative program will offer relief to underwater homeowners in certain situations, but according to reports, the amount of the principal reduction, or even an offer at all, will be at the discretion of the mortgage servicer working with the homeowner who has seen a loss in the property’s value.

In the past, some financial institutions have stated that in cases where a homeowner is unlikely to recoup any of the value they lost on their home in the near future or are seeing mortgage payment troubles as a result of an underwater mortgage, principal reduction may be used in select cases. However, with more homeowners suffering from an underwater mortgage situation, it’s hoped that this new Principal Reduction Alternative plan will be offered on a wide scale so that homeowners who owe more on their home than their home is worth will not have to face foreclosure as a result of the inability to meet payments on their home.