Homeowners with an underwater mortgage in need of assistance plans are still continuing to look for solutions as home prices have continued to drop in many areas across the nation. While there have been some reports that have stated more major financial institutions are beginning to use principal reductions in cases where negative equity has become problematic or severe, there are still homeowners who feel that more of these efforts must be made and, in some cases, mortgage principals need to be drastically reduced so that homeowners may avoid problems associated with making their payments or the temptation to walk away.
Reportedly, home prices fell in the latter part of 2010, which is said to be attributed to factors like unemployment, foreclosures, and low numbers of new homebuyers. Obviously, the amount of homes that are simply sitting empty in the housing market are more than the number of individuals who are looking to purchase a new home, and these properties that have remained vacant in areas where foreclosures continue are simply dragging down these property values in numerous areas.
For homeowners who are in need of underwater mortgage assistance, there are refinancing opportunities and payment reduction plans through modifications which may be helpful for those who may have an adjustable-rate mortgage or who are simply finding that their current financial position is not allowing them to combat negative equity in their home. Yet, one option that has been proposed and will hopefully be more available in 2011 is the practice of short selling a home when a homeowner is simply in a situation where they can no longer afford their mortgage payment, even when underwater homeowner assistance is available.
Obviously, individuals who are in a situation where their home has lost a great deal of value would rather find affordable options through principal reductions or refinancing so that they can remain in their home, but in cases where this has not been available, many homeowners have faced foreclosure as a result. Yet, short sales have been used by many banks as a way to allow homeowners to forgo a formal foreclosure process, while also moving a new family or homeowner into a property rather than letting it sit empty.
While many homeowners who have attempted to find a short sale have discovered that there were problems, indications that more servicers want to use this foreclosure alternative in the coming months is hoped to aid in the transition from homeowners who cannot afford a home to new homeowners who may be able to begin making payments but there are concerns that short sales are simply too slow. An article on HousingWire.com stated that, “…it takes four to nine months on average to finish a short sale. About 10% of the transactions take more than 10 months, and 18.3% are finalized within the preferred three-month time frame.”
However, underwater home loans are continually arising as problems in various areas, and coupled with factors like unemployment, underemployment, or other financial strains that homeowners are facing, this has created an environment where more homeowners want solutions for underwater home loans that may go beyond simple federal refinancing plans, and could include further efforts to either reduce mortgage principles, offer more affordable monthly payments, or the opportunity to short sell a property if a homeowner cannot qualify for these other foreclosure prevention efforts.