Current negative equity refinance programs for homeowners in an underwater mortgage situation offer the option for refinancing to a more affordable home loan rate or monthly mortgage payment, which has been necessary for some who have seen the value in their home drop, but some homeowners feel that the amount of options available may not provide the foreclosure prevention assistance that some need when it comes to handling the costs associated with their underwater home loan.
While popular programs like the Home Affordable Refinance Program and the FHA short refinance program have been implemented over the past months, there are some homeowners who may not qualify for this form of underwater mortgage assistance or, as is the case with the FHA short refinance program, this plan has yet to truly get off the ground due to qualifications and eligibility requirements.
Underwater homeowners who have a mortgage that is owned or guaranteed by Fannie Mae or Freddie Mac may be able to refinance through HARP, but homeowners who are current on their mortgage had hoped the FHA program would allow for refinancing options as this also require a principal reduction on the part of mortgage servicers. However, within the FHA’s refinance program, current homeowners would be given a principal reduction and their servicer would essentially allow their mortgage to be refinanced under an FHA-backed program. This, obviously, equated to servicers handing over a home loan whose borrower was able to make their monthly payments on their underwater mortgage.
Obviously, principal reductions are still a major issue for underwater homeowners, but alternative programs like the Hardest Hit Fund may offer principal reduction opportunities or home loan assistance where negative equity is in place. While homeowners who may have, for instance, an adjustable-rate mortgage are looking for a more affordable, fixed-rate home loan that may offer a lower monthly payment and affordability, those who typically do not qualify for HARP may have to turn to their servicer in the hopes of finding some form of underwater mortgage assistance.
There are some financial institutions that have offered principal reductions and forgiveness or a forbearance on a homeowner’s principal at the present time, until they can find a more stable financial ground but reports have predicted that home loan prices may drop further in 2011, so more homeowners are calling on the issue of negative equity to be addressed as, for some, simple refinancing options for a more affordable payment are not enough and a reduction in an underwater mortgage principal is also requested.