There are reports concerning reductions in mortgage balances from Fannie Mae and Freddie Mac that could give more opportunities for homeowners who are having difficulty making their monthly mortgage payment obligation. Underwater home loans have been a problem for numerous individuals across the nation, and discussions between the government and Fannie Mae and Freddie Mac officials may lead these two mortgage institutions to offer homeowners not only the opportunity to find affordability in their underwater mortgage, but to transfer their home loan to an FHA mortgage.
While there has been underwater assistant plans available to Fannie Mae and Freddie Mac homeowners through the Home Affordable Refinance Program, there are many who feel more needs to be done concerning reducing mortgage balances on homes where a homeowner owes more than their home is actually worth. Reports have shown that many financial institutions which service mortgages have been unwilling to reduce principal balances, especially for homeowners who are still current on their payments.
The FHA short refinance program was proposed months ago and allows homeowners who were in a good position concerning their mortgage payments to refinance their underwater mortgage, receive a principal reduction, and enter into a more affordable FHA mortgage agreement. However, many felt that this program may provide lackluster results as financial institutions had to agree to offer an underwater mortgage principal reduction to homeowners, which again, is something that has not been widely available for homeowners who are current on their payments.
Hesitation on the part of Fannie Mae and Freddie Mac has typically centered around the fact that if homeowners whose loans are owned or guaranteed by Fannie Mae and Freddie Mac receive a principal reduction and are transferred to the FHA, this could lead to further losses for these mortgage institutions.
Yet, there are arguments that programs which offer principal reductions for underwater homeowners will be vital to the stability of the housing market as many homeowners, even those who are current on their mortgage, may fall into a situation where their mortgage becomes unaffordable or, as is evidenced by past occurrences, some homeowners have simply walked away from their underwater situation where no assistance was available.