The FHA short refinance program has been in the news recently as officials have been in talks with Fannie Mae and Freddie Mac to begin participating in this underwater refinancing program. Obviously, underwater homeowners are becoming more common as around one-quarter of homes were felt to be underwater in some form or another across the nation. Understandably, the severity of underwater homes will be dependent upon a homeowner’s area as some states have seen more loss of property value than others, but programs like the FHA short refinance option were hoped to provide current homeowners with the opportunity to gain a more affordable mortgage payment despite owing more on their home than their home is worth.
It goes without saying, many believe that until the housing market recovers and factors like unemployment began to abate, the economy will not fully recover and hardships could continue in many areas. Yet, concerns over the possibility that home prices may continue to fall in 2011 are one of the reasons that officials have hoped to get Fannie Mae and Freddie Mac on board with the FHA’s initiative to assist underwater borrowers.
However, some reports have a negative view on the FHA refinancing program, as many feel that Fannie Mae and Freddie Mac stand to lose a great deal in the process. Essentially, homeowners who are current on their underwater mortgage may be able to refinance their home into a more affordable FHA option, and have a principal reduction which could go a long way in helping the affordability of these underwater mortgages.
Yet, concerns over the losses that Fannie Mae and Freddie Mac would sustain from these principal write-downs and further troubles which could arise if one of these homes goes into foreclosure has concerned many as a great deal of strain could be put on Fannie and Freddie, not to mention the Treasury as well. Also, there are some homeowners who are angered that certain individuals are getting a principal write-down while others who may not be in a dire situation or may not be in a fully underwater home loan predicament are getting no assistance when it comes to the affordability they seek in their mortgage payment.
Obviously, home loan modifications are one of the primary means which have been used by financial institutions and the federal government to provide foreclosure prevention assistance to some homeowners, but when a severe loss of value is present on the property, some homeowners may be able to meet their mortgage payment for a set period of time, but troubles typically arise or homeowners are simply in a position where they cannot pay their home loan once negative equity is in place.
While the FHA underwater refinancing program and options like the Home Affordable Refinance Program has been used to help homeowners with negative equity, some officials feel that options particularly addressing troubles with underwater mortgages need to be made available as, some plans may create more difficulties down the road if, for instance, principles are forgiven, losses are taken by servicers, and a homeowner finds themselves in a position where they face foreclosure in the future.