Governmental Underwater Assistance–HAMP Refinancing Plans And Principal Forgiveness Options

Underwater mortgages have become a problem for numerous homeowners and, as a way to combat this difficulty, the Home Affordable Modification Program implemented certain underwater assistance plans which may offer homeowners the opportunity to either refinance their underwater mortgage or earn a principal forgiveness on a percentage of their mortgage.

However, critics of these programs say that many financial institutions are either not working with homeowners in an underwater situation or maybe unwilling to go along with certain aspects of these underwater programs, like principal reductions. The Home Affordable Refinance Program was set in place to allow homeowners to refinance their underwater mortgage under certain conditions, which was hoped to help homeowners avoid the loss of their home through foreclosure or prevent homeowners from walking away.

Yet, alternative plans like the FHA short refinance program were also proposed to help homeowners, who may be in good standing on their underwater mortgage, refinance their home loan to a more affordable rate when negative equity was present. However, both of these programs were said to be doomed from the beginning as homeowners with an underwater mortgage and who face foreclosure may be unable to find the assistance they need due to mortgage servicers being unwilling to refinance underwater mortgages or, again, lower a homeowner’s principal.

Yet, for homeowners who have attempted to refinance to the FHA refinance program, part of this program requires that a mortgage servicer reduce a homeowner’s principle, which again, may be problematic.

While there have been state-specific underwater assistance programs which have been proposed from various state housing agencies, these federal mortgage assistance programs for underwater homeowners are still available, despite the criticism they have received. Not all homeowners may be able to benefit from these underwater refinancing plans, but advisers have suggested that homeowners either talk with their mortgage servicer or, as of late, they can speak with their state’s housing agency to see if underwater assistance may be available for their situation.