Assistance For Homeowners With Negative Equity–Underwater Mortgages Rise As Home Prices Drop In 2010

New revelations over underwater mortgages have stated that as home prices dropped in the latter part of 2010, more homeowners found themselves in an underwater mortgage situation, which has led to many homeowners seeking assistance with their negative equity problem as both mortgage payment difficulties and general homeowner frustrations have led to homeowners wondering whether they will be able to remain in their home.

A CNNMoney.com article stated that home prices dropped 2.6% during the last quarter of 2010, which obviously pushed more homeowners into an underwater situation and, at the present time, 27% of homeowners owe more on their home than the property is actually worth.

Understandably, this is a very frustrating situation for homeowners who may be current on their mortgage and has created a sense of hopelessness for homeowners who are having trouble making their mortgage payments or who may have already missed payments and are near defaulting on their mortgage. While assistance plans like the Home Affordable Refinance Program, traditional home loan modifications, a Principal Reduction Alternative and even a proposed FHA short refinance program were all presented as solutions to homeowners, there are still struggles that homeowners face which have not been addressed by these assistance plans and, as a result, underwater mortgage aid may need to be reevaluated if widespread foreclosures or strategic defaults are to be prevented.

Obviously, refinancing options through HARP allow homeowners with a mortgage guaranteed or owned by Fannie Mae and Freddie Mac to possibly find more affordability, there have been calls for servicers to offer principal forgiveness in cases where negative equity has been a problem, but many feel that simply lowering a homeowner’s principal does little to help with affordability and have opted for home loan modifications instead. While current homeowners may have had the option through the FHA short refinance program to have a percentage of their mortgage principal forgiven and refinance into an FHA-backed mortgage for more affordability, this plan never really got off the ground as servicers were unwilling to allow homeowners who were current on their underwater home loan payments to refinance with the FHA while also offering a principal forgiveness opportunity.

Yet, despite the fact that it’s been stated that over 33% of homes sold in December were sold at a loss, questions as to how affordability can be addressed in areas where homeowners are simply struggling to make payments are still an issue that many homeowners feel need to be addressed as countless foreclosures continue to arise across the nation. Unemployment and underwater home loans are two of the driving forces behind foreclosures as either homeowners who are without a job simply cannot meet their mortgage payment or a drastic drop in a homeowner’s property value has created difficulties related to their mortgage payment obligation when certain types of home loans are present.

The issue of underwater home loans and assistance for homeowners in a negative equity situation is one that many feel needs to be addressed early in 2011 out of fears that more homeowners may find they cannot meet their mortgage payment due to negative equity, unemployment, or a combination of both and these foreclosures will simply add to a growing number of homes sitting empty in the housing market.