Refinancing An Underwater Home Loan And Lowering Monthly Payments–Do Homeowners Need More Options?

Options for homeowners to refinance their underwater mortgage and lower their monthly mortgage payments are available but there are questions as to whether homeowners need more opportunities when it comes to dealing with their underwater mortgages. There are concerns that more homeowners will begin walking away from their mortgage in the coming months due to the fact that there are predictions for a further drop in housing prices, essentially meaning things will get worse before they begin to improve.

Obviously, underwater homeowners have been present in the housing market throughout 2010 and as many situations where underwater home loans are present have become more dire, solutions for these difficulties were presented through various programs. Plans like the Home Affordable Refinance Program are one of the more common opportunities homeowners have when it comes to refinancing their home loan, as individuals with an underwater mortgage that is owned or guaranteed by Fannie Mae or Freddie Mac may have the option of finding more affordability in their underwater mortgage payment.

Also, home loan modification options have been used to either expand homeowner terms or lower interest rates so homeowners can find a lower monthly payment obligation when their underwater home loan is causing them financial strain. Understandably, numerous homeowners who have faced personal financial difficulties and have combated home loan troubles are greatly frustrated at the devaluation of their mortgage and being in a situation where they owe more on their home than their home is actually worth.

A recent program which was proposed by the FHA seems to offer homeowners an option which could solve underwater mortgage difficulties but hesitation on the part of mortgage servicers has made the benefits which homeowners felt they could gain from this program almost nonexistent. The FHA short refinance program allows homeowners whose servicers will participate the option to have a percentage of their principal forgiven and the opportunity to refinance to a more affordable FHA-backed home loan.

Obviously, mortgage servicers have been hesitant to use this program due to the fact that they will take a great deal of loss when they write down mortgage principles for homeowners who are current on their underwater mortgage payment. Many of the options that are available to homeowners who are in a negative equity situation center around providing more affordable monthly mortgage payments but there are numerous individuals who want a principal reduction to bring their home’s value closer to its current market price.

Yet, principal forgiveness has been difficult to obtain by many homeowners despite the fact that some servicers have offered earned principal forgiveness programs if homeowners remain in their home and stay current on their monthly payments. However, concerns over more homeowners defaulting in the coming months as mortgage prices are predicted to drop even more in some areas have many asking whether more opportunities for underwater home loan solutions need to be presented in order to avoid a flood of strategic defaults.