The opportunities for underwater homeowners to refinance their home loan may be limited, but programs like the FHA short refinance option have been made available to certain individuals in the hopes of providing more affordability on their mortgage. Yet, there are concerns even where programs like this short refinancing plan from the FHA are concerned, as there are certain qualifications homeowners must meet that many feel may cause trouble for homeowners seeking this type of assistance.
One aspect of the FHA short refinance program is that homeowners must be current on their mortgage, which means that homeowners who are meeting their monthly mortgage payments despite being in an underwater position are only those who may qualify.
While this can be beneficial for homeowners who may have considered strategic defaulting by simply walking away from their mortgage, there is concern over another aspect of the program which may cause a hindrance for homeowners seeking to refinance their underwater home. Mortgage servicers must be willing to write off a percentage of the mortgage principal in the FHA short refinance programs, which many feel may not happen since homeowners must be current on their home loans qualify.
Obviously, financial institutions may be unwilling to lower a homeowner’s principle through a principal forgiveness option if the homeowner is able to meet their current monthly mortgage payment. While this underwater refinancing program is not the only underwater home loan assistance plan available, it has given hope to some underwater homeowners who are continuing to make payments on their mortgage despite being in a negative equity situation.
Yet, some mortgage servicers have been unwilling to offer a wide range of principal reductions on underwater home loans as they feel these types of efforts do not lead to long-term affordability. However, homeowners who are considering their underwater home loan options may still be able to work with their servicer and the FHA so that they may refinance their home loan for a more affordable rate. Again, underwater refinancing and principal forgiveness may not be widely offered, but homeowners have still been prompted to explore their options as negative equity can cause problems down the road for homeowners and is obviously a very frustrating situation for homeowners even if they are able to continue meeting their mortgage payment.