Underwater Mortgages Reported To Be Down But Is The Cause Foreclosures Or Underwater Assistance Plans?

Underwater mortgages have been a problem for many homeowners as some reports indicate around 25% of homeowners have suffered from negative equity throughout 2010. However, there is some hope in the realm of underwater mortgages as underwater mortgage assistance plans have been offered from sources like the FHA, through their short refinance program, and from the Home Affordable Refinance Program, which may address underwater homeowners with a Fannie Mae or Freddie Mac mortgage.

However, there are reports that have also recently mentioned underwater mortgages dropped in the third quarter of 2010 to around 22%. These are residential properties with mortgages that have negative equity, and is a decrease from the previous quarter, which many feel to be a positive note concerning underwater homes. Numerous underwater homeowners have had a great deal of difficulty finding solutions to their problem of negative equity, and as a result more homeowners have simply walked away from their mortgage, which has been termed “strategic defaulting”.

Yet, this drop in underwater mortgages could also point to a less desirable cause, meaning homeowners may be facing foreclosure on their negative mortgage rather than seeing their property value increase. CNBC recently reported that foreclosures are said to be one of the main causes of this drop in negative equity for residential properties.

While there are some homeowners who have seen an increase in their property value and others have been aided through underwater assistance plans, negative equity refinancing options, and even principal forgiveness in some cases, housing values continue to drop for many across that nation. Particularly, state’s like Florida, Michigan, California, Nevada, and Arizona were said to be some of the hardest hit areas concerning underwater mortgages.

Fannie Mae and Freddie Mac have been prompted over the past weeks to begin working within the FHA short refinance program in order to offer current homeowners who are underwater but up-to-date on their mortgage the chance to refinance and receive a principal reduction, but these efforts have been met with resistance.  When it comes to servicers offering write-downs on principals, especially for homeowners current on their mortgage, there has been hesitation on the part of many financial institutions.