Homeowners who are facing an underwater mortgage situation had hoped the FHA short refinance program would allow them the opportunity to find not only more affordability through refinancing, but offer a mortgage principal reduction option as well. However, homeowners who were attempting to use this program had reportedly seen little success throughout 2010 due to the fact that many financial institutions were unwilling to write off a substantial amount of a homeowner’s mortgage principal and allow these homeowners to then refinance to an FHA mortgage.
Home values have continued to drop in many areas across the nation, which has obviously created a difficult situation for homeowners who are facing financial strains in their life or who have seen such a drastic drop in their property value that they will unlikely see any profitability on their home if they were to sell in the future. Understandably, these homeowners are in a very frustrating situation when they owe a substantial amount more on their home than it’s actually worth.
Yet, a recent report on HousingWire.com stated that more lenders have signed on to the program, as of February 2011, which is hoped to bring more progress in this underwater home loan refinancing option for homeowners who are current on their mortgage. Obviously, homeowners who are not behind on their home loan payments despite being in an underwater mortgage situation are those who qualify for the FHA short refinance program, and as a result, many servicers have been unwilling to allow principal reductions and refinancing, which has prompted some homeowners to consider walking away.
However, there are some officials who have reported that this particular program has simply been slow to get off the ground, which is a hopeful statement for underwater homeowners who are looking for ways to make their mortgage more affordable. Obviously, in areas where a substantial amount of home value has been lost this FHA short refinance program could help homeowners who are still current on their mortgage but still owe a great deal more on their mortgage than the value of their property. It’s hoped that if more servicers begin using the short refinance program it could help homeowners who may either potentially struggle with underwater home loan payments in the future or it could keep more underwater homeowners in their home as, again, the practice of simply walking away from a negative equity situation has been deemed a viable option by many frustrated homeowners.
In terms of affordability, homeowners do still have federal modification plans that may be used and the Home Affordable Refinance Program, but if the FHA short refinance program does make a comeback in the coming months, it could open the door for homeowners suffering from negative equity to not only find more affordability by refinancing but also gain a principal reduction as well.