Principal Reduction Alternative Program Addresses Negative Equity For Homeowners With Major Mortgage Servicers

Many homeowners who are in a negative equity situation are foremost looking for a principal reduction along with affordability to address issues related to owing more on a home than the home is worth. Understandably, homeowners in a negative equity situation are looking for ways to find more affordable monthly payments, in many cases, but this can be acquired through modifications or refinancing options from the Home Affordable Refinance Program, but the issue of principle reductions has been one that some homeowners feel needs to be more closely addressed as some servicers were hesitant to make these concessions in situations where a homeowner lost a substantial amount on their property’s value.

However, there has been some reports that state many of the largest mortgage servicers in the nation who are participating in the Making Home Affordable Program are starting to use these principal write-downs as a way to help underwater homeowners and, for homeowners in these situations, these initiatives are quite welcome due to the fact that substantial losses have been seen in various areas across the nation.

Sadly, there are some reports of continued decreases in home property values and some predictions that areas of the housing market will either continue to drop in 2011 or, if they find bottom, will not see any increases back to original values anytime in the future. Understandably, homeowners in these situations are either looking for help in terms of their mortgage payment, as some homeowners who saw a great deal of equity lost in their home are now in a position where meeting their monthly mortgage payment has become difficult due to the type of mortgage they have, yet others have simply walked away as a result of these losses.

While, again, homeowners can find more affordability on their monthly mortgage payment even when a negative equity situation is present, there are some banks who, over the recent months, have felt that principle reductions do little to help homeowners in terms of affordability and were not part of their solutions to underwater home loans. While the Making Home Affordable Program does offer principal forgiveness under some conditions and the Principal Reduction Alternative plan has been in place over the past months, servicers are not required to lower an underwater homeowners principle, which again, has led to some homeowners growing quite frustrated with their negative equity position.

Yet, as continued devaluation becomes an issue and reductions in property values have been so substantial, there are reports that more of the financial institutions charged with assisting troubled homeowners are beginning to forgive principal amounts so that homeowners can either find more affordability or will forgo the practice of simply walking away from their home loan. Understandably, not all homeowners have received a principle reduction on their home loan, despite being in an underwater situation, but there are plans currently in place that are hoped to be of more use in the coming months.