Principal Reduction Options For Underwater Homeowners–Lower Home Prices And Assistance Programs

Principal reduction options available to underwater homeowners facing negative equity on their home are still being called for as home prices remain low, have left homeowners in a frustrating situation and of the mind that current underwater mortgage assistance plans may not be enough.  Homeowners are feeling burdened under the weight of owing more on a mortgage than their property is actually worth, which is becoming more common in various areas across the nation as lower home prices are still an issue that homeowners are attempting to overcome.

A report on CNBC.com stated that, “…home prices fell for the sixth month in a row in December, bringing them closer to the low seen in 2009.” The article went on to say that, “The numbers heightened worries that the housing market has entered a double dip and could remain mired for months to come.” Obviously, underwater mortgages have been a substantial strain on not only the housing market, but within the personal lives of many homeowners across the nation who are looking for more affordability in not only their monthly payments, as an underwater home loan creates problems in this area, but also, homeowners want more principal reduction plans that can lower their mortgage to a level that is closer to the current market value.

The Home Affordable Refinance Program, which has allowed underwater homeowners to refinance through the Making Home Affordable Program is set to expire in 2011, initiatives like the Principal Reduction Alternative Program have also been implemented as a way to offer homeowners underwater debt relief assistance in areas where negative equity has been quite severe. Obviously, there are a great deal of problems and outcomes that have been seen related to underwater home loans, as there are some homeowners who have had trouble making their mortgage payment, have been unsuccessful at finding a reduction in their mortgage principal, and there are homeowners who have simply walked away.

While there are initiatives in place to offer lower principal amounts on homes where negative equity is present from not only federal programs but by particular financial institutions as well, there are still many homeowners who are frustrated that some banks do not either offer principal reductions or are not reducing mortgage principals to an amount that is reflective of what their home is currently worth in the housing market.

If continued decreases in home values remain in 2011 or, as some analysts feel, we are at the bottom of the drop and property values but will remain stuck in this position for a while, there is question as to whether more homeowners should be offered a principal reduction or whether widespread forgiveness of mortgage principles could create more problems in the housing market. While there are some of these programs which can still assist homeowners and underwater situation, it’s understandable that homeowners remain frustrated at seeing their property value plummet to a level where they will unlikely see any recovery in the near future.