Negative equity has been an issue for many homeowners as numerous individuals seek help for their underwater home loan situation and ways to handle the stress and strain that come with paying on a home where negative equity is present. Obviously, homeowners who owe more on their home than it is actually worth are considering walking away more than in years past, but financial counselors strongly advise against consumers taking this course of action as it could have detrimental effects on their financial life and credit score. While they may be limited, there are programs tailored to help homeowners who are in an underwater situation, but there are some concerns as to the future of these underwater mortgage assistance programs as some are soon set to expire.
One of the more popular methods through which homeowners have found affordability in their monthly mortgage payment is through the Home Affordable Refinance Program. Homeowners whose mortgage is owned or guaranteed by Fannie Mae and Freddie Mac have been able to refinance to seek more affordability in their home loan, but this program is scheduled to end in the summer of 2011, and with other programs like the FHA short refinance plan having largely failed, there is concern as to how homeowners could find affordability on their underwater home loan.
Typically, homeowners in a negative equity situation fall into two categories and, when it comes to addressing the issues within these categories, vastly different methods may need to be implemented. Obviously, homeowners who cannot afford their mortgage payment due to decreased equity in their home are looking for more affordable payments primarily, but many would also like a principal reduction if their home has seen a substantial decline in value. While modifications are helpful in some cases, again, underwater refinancing has been available in certain cases, but many homeowners have stated that principal reductions are quite difficult to come by.
This has led to difficulty in the second category of underwater homeowners, being those who can afford their monthly mortgage payment despite being in a negative equity situation, but who wish to find more affordability through the reduction in their mortgage principal to the current market value of their home. Homeowners who have viewed their home as an investment or who still owe a substantial amount on their mortgage have often questioned why they should continue to meet their mortgage payment obligation when they may never recoup any losses that resulted from the devaluation in their property.
For this reason, there are many homeowners who want more options when it comes to handling underwater home loans as finding affordable monthly payments can be accomplished in many cases, but homeowners who have seen drastic drops in their property value that may never return have been seeking short sale options as a way to escape the continued obligation of paying on a home home that is worth a great deal less than when it was purchased. While there are predictions that short sales may become another widely used option by banks in 2011, homeowners simply needing more affordable payments on their home loan do still have options through HARP, and principal reduction programs from state-specific underwater assistance plans may also be available in the hardest hit areas of the nation through the Hardest Hit Fund.