As underwater home loans become more problematic in the lives of numerous individuals across the nation, there are more outcries from homeowners to address these issues through affordability programs and principal reductions which can help those who are in a severely negative equity situation on their mortgage. Understandably, homeowners who owe more on their homes and their home is actually worth are the frustrating position and, depending upon how one views their home, homeowners are either looking for a way to simply keep a roof over their head or make their home more of a profitable investment if they choose to sell in the future.
Luckily, the Hardest Hit Fund has offered underwater homeowners assistance in various states through principal reduction programs which may help homeowners in a negative equity predicament. Programs like those in California and Michigan offer these principal assistance plans for homeowners who have seen a drop in their home’s value to a point where their mortgage is more costly than the value of their home.
Federal assistance plans that offer refinancing or modifications have helped some with affordability issues, but more homeowners are looking for principal reductions as there have been areas across the nation where a substantial amount of property value has been lost. Obviously, this has prompted numerous individuals to simply walk away from their mortgage, which is something that servicers wish to avoid as this creates only more problems in the housing industry and, when homes are left sitting empty, property values remain stagnant or drop further.
While reports have indicated that home prices did continue to be fall somewhat in 2010, homeowners in need of affordability on these underwater mortgages do have options, but many major financial institutions have been hesitant to offer these principal reduction programs. Typically, principal forgiveness may be at the discretion of the servicer and depending upon a homeowner’s situation and the financial institution that services their mortgage, this may not be an option as some servicers have stated they do not feel that principle reductions are helpful when it comes to keeping homeowners in their home and have focused on programs to help lower underwater home loan payment costs rather than offer principal forgiveness.
Yet, homeowners in these Hardest Hit States may have additional opportunities available for principal reduction plans through funding that has allowed various state housing agencies to implement assistance programs for foreclosure prevention, second liens, unemployment difficulties, and underwater home loans. While these plans are not guaranteed and in many cases homeowners must also work with a mortgage servicer, advisers hope that these additional underwater homeowner assistance opportunities through principal reductions will not only provide more affordability for homeowners in a negative equity situation, but also prevent more homeowners from walking away from their mortgage and doing damage to their financial life.