FHA Short Refinancing Plan–Will Underwater Refinancing Help Homeowners With Negative Equity?

Homeowners have been seeking options for dealing with their underwater mortgage through refinancing opportunities that may be available to create a more affordable monthly mortgage payment on a home where negative equity is present. Numerous homes across the nation have seen a decline in their value as various factors come into play that have caused trouble in the housing market.

Yet, programs like the FHA’s short refinance plan may allow homeowners to refinance their home, obtain a principal reduction in certain conditions, and simply get in more affordable mortgage despite having negative equity. Certain homeowners who have specific types of mortgages, like adjustable-rate mortgages, may have seen problems arise when their home has lost a substantial amount of value.

For this reason, programs to address these underwater mortgages have been proposed and are now available to homeowners who qualify. Obviously, programs like the FHA shore refinance plan, which allow homeowners to refinance into an FHA-insured mortgage, have the potential to bring a great deal of affordability to a home where the homeowner may owe more than the home is actually worth. This situation has frustrated numerous homeowners and has led to strategic defaults, where homeowners have simply walked away from their mortgage obligations.

However, despite opportunities like the short refinance plan available to refinance an underwater home loan, there are those who feel these underwater refinancing plans may be unhelpful as certain mortgage servicers may be required to reduce a homeowner’s principal before the plan will be completed.

While there have been principal reduction programs proposed, many mortgage servicers have been unwilling to lower mortgage principles on certain homes, as there are financial institutions that feel principal reductions are not always helpful in making a home more affordable. Despite that it may not be available for every homeowner, this FHA short refinance program may be beneficial for some, when it concerns finding affordability on a home that has seen a decrease in property value and has left the homeowner in a difficult financial position.