The FHA underwater assistance and principal reduction plan known as the Short Refinance Program may offer underwater homeowners relief from negative equity, but there have been opponents of various programs, including this underwater assistance plan, which have led many to believe that these initiatives have been largely unhelpful and wasteful to consumers. However, despite the fact that the House of Representatives voted to terminate certain programs, with the Short Refinance Program being one of them, there are reports that show these plans will likely continue.
Yet, concerning the FHA’s Short Refinance Program, it was hoped this plan would provide more affordability for homeowners suffering from negative equity due to the fact that it would require servicers to offer a principal reduction in cases where property value had been lost and, after a reduction was made, homeowners would be able to refinance into an FHA-backed mortgage, which could bring more affordability for homeowners suffering as a result of owing more on their home than it’s actually worth. Obviously, traditional refinancing efforts were unavailable to individuals who had negative equity on their home, but with principal reductions combined with refinancing opportunities, it was believed that the Short Refinance Program would provide solutions to these problems.
There was, however, a slow start for the program as few servicers had begun participating and even fewer homeowners had actually been offered assistance by way of this FHA initiative. For this reason, as well as, opponents stating that this program helped banks more than homeowners, there was a vote to terminate the program, but recent reports have stated that more major servicers are beginning to sign on with the Short Refinance Program and this could bring about more underwater assistance options for homeowners in need.
On Monday, HousingWire.com reported that five of the largest lenders in the US signed up to begin participating in the Short Refinance Program, and this has led to an increase in the number of applications and program endorsements in the program for homeowners suffering from negative equity.
Understandably, there is still opposition for certain assistance programs and, as there are officials who want to end these initiatives, others feel that where they have fallen short restructuring should be implemented rather than simply ending the program, which again, could be greatly helpful to homeowners. One of the benefits that may come from the Short Refinance Program is that homeowners who are current on their mortgage despite being underwater are those who will qualify as, in many cases, these individuals have been the ones who were finding few affordability alternatives to their predicament.
While the Home Affordable Refinance Program was offered to homeowners from the Making Home Affordable Program, homeowners who were in a distressed situation often had more options, like modifications, when it came to finding affordability and, according to some, principal reductions were hard to come by. While there have been homeowners who are current on their underwater mortgage payments who may have found relief in other ways, those who are in a severe negative equity situation and may be considering walking away could find solutions through this FHA initiative, as there are predictions that proposals and votes to cancel the programs that have been in place to help homeowners will either be stopped in the Senate or by the president.
Understandably, the Short Refinance Program may not be perfect or helpful to every underwater homeowner, but it’s hoped that more aid through this particular initiative will be offered to homeowners who are still seeing a decrease in their homes value or have sustained such a loss to their home’s value that it may be unlikely they will recoup these losses in the near future.