Wells Fargo’s assistance plans from home loan modifications have seen some success over the past months, but there are some concerns that servicers like Wells Fargo will have to begin addressing underwater homeowner issues in order to offer more affordable mortgage payment. Obviously, Wells Fargo does participate in the short sale in deed in lieu of foreclosure plans, which are part of the Home Affordable Foreclosure Alternatives program, but there are still homeowners who wish to remain in their homes despite being underwater or those who simply are struggling to make their mortgage payment and are in need of affordability.
Programs which allow homeowners to refinance their underwater mortgage are few as the Home Affordable Refinance Program and the FHA short finance initiative all are two of the main options which homeowners have been able to use. However, the FHA program has seen little success as it only applies to homeowners who are current on their mortgage and requires that servicers will reduce a homeowner’s principal, and the Home Affordable Refinance Program is only for homeowners who have a home loan own or guaranteed by Fannie Mae and Freddie Mac.
Yet, home loan modification programs are still offered by Wells Fargo through both the federal mortgage modification program and in-house plans directly from Wells Fargo. Recently, a report was released stating that Wells Fargo had a total of 515,568 modifications through Wells Fargo’s own programs which were still in place as of November 30, 2010.
Overall, proprietary modifications have been said to have outpaced the federal home loan modification program in terms of the number of homeowners who have been receiving permanent modifications. Obviously, there have been problems with Wells Fargo and other servicers as many homeowners have been unable to find the mortgage assistance they need, but there is still numerous homeowners who are looking for a lower monthly mortgage payment and are trying to obtain a modification as a result.
However, issues over continued devaluation in property values is expected to continue in the near future, which may necessitate that problems like underwater mortgages be addressed in alternative ways. Many servicers have offered homeowners who are struggling to make their underwater home loan payment a modification as a way to lower their monthly mortgage obligation, but many homeowners who are in a severe negative equity problem or face issues like unemployment may be unable to afford their home and, in some cases, have simply walked away.
Addressing issues like underwater mortgages and strategic default may be necessary for servicers in the near future, as this problem may move to the forefront of housing issues and some homeowners who have called for principal reduction options may not be satisfied with simple modification programs from servicers like Wells Fargo. While there are some financial institutions that do offer earn principal forgiveness plans, and permanent home loan modifications from the Making Home Affordable Program may offer a principal reduction of up to $5,000 over four years, there are still concerns that affordability issues and underwater mortgages will remain problematic and, homeowners who are unable to either lower their mortgage payment through successful modification programs or find the principal reductions they seek may either simply face foreclosure or walk away from an underwater home.