Underwater Home Loan Refinancing–Extended Negative Equity Troubles For Homeowners And Assistance Options

Negative equity has been a problem for numerous homeowners as the extended timeframe of economic hardships and housing difficulties have led to few areas of the housing market seeing increases or success when it comes to rebounding from previous dips that have been the result of the recession, foreclosures, and factors like unemployment. Yet, homeowners over the past months were able to use various forms of refinancing on their underwater home loan as a way to gain more affordability on their monthly mortgage payment in hopes of avoiding foreclosures related to negative equity situations that caused some homeowners’s mortgage payment costs to skyrocket.

Obviously, the options for homeowners to refinance their home when they are in a negative equity position has been severely limited, but programs like the Home Affordable Refinance Program have been able to bring more affordability to homeowners who had either their home owned or guaranteed by Fannie Mae and Freddie Mac. While home loan modifications have also been one way underwater homeowners may have gained a lower monthly mortgage payment obligation, there are still homeowners who feel more options must be made available since extended negative equity problems have made it hard for some to either meet their payment or have given those who can make their monthly mortgage payment obligation little reason to remain in their home.

Strategic defaults remain a problem for some servicers as homeowners who feel that there is a small likelihood that their home will regain its original value in the near future, if at all, have led many to wonder why they are making payments on a home that is worth less than their mortgage. Obviously, some homeowners are simply looking to keep a roof over their head and, through refinancing and modification efforts, have been able to do so, but homeowners who are in a decent financial position and are not finding either the refinancing or principal reduction options they want are, again, questioning why they should stay with their current mortgage.

Yet, there are those who feel that extended underwater mortgage problems and negative equity may lead to more servicers offering short sale options in 2011 as there are, again, few proposals for underwater home loan refinancing or principal reductions from servicers. While there are some banks that do offer principal forgiveness programs and there are limited principal reduction options associated with federal home loan modifications, many homeowners who are facing negative equity want the principal amount they owe on their home reduced to their property’s current market value.

Again, refinancing options have been made available for some and assistance to lower mortgage payment obligations have also been presented to certain homeowners in underwater situations, but unless more solutions are presented to homeowners in a negative equity home, there is concern that strategic defaults may remain an issue for servicers or short sales and deed in lieu of foreclosure plans may need to be implemented more so in the coming months if housing values, or the overall housing market, does not see improvements that many homeowners feel may show a positive sign for their home’s value in the future.