Underwater refinancing programs have been sought out by numerous individuals and, one of the more widely known options for refinancing has come from the Home Affordable Refinance Program, as a way to help homeowners find the help they need when their negative equity has caused financial problems in relation to making their home loan payment more difficult. However, there are some issues that homework still have with the federal modification program in general and some advisers are starting to look at how homeowners may be helped from the Home Affordable Refinance Program or whether they may want to seek out other options.
While there are plans like the FHA’s short refinance program and various principal reduction efforts and home loan assistance plans from the Hardest Hit Fund, there are still issues that homeowners have when it comes to affordability in their home loan payment and some have turned to HARP for the answers to their problems. However, when it comes to dealing with negative equity, some servicers are unwilling to offer principal reductions in instances where homeowners may be able to meet their mortgage payment, while other lenders may simply not participate in certain underwater mortgage refinance initiatives.
However, many homeowners feel that the Home Affordable Refinance Program could have potentially been the answer to their negative equity problems, but a recent article on Bankrate.com stated that, “Borrowers who refinanced through HARP in the first half of 2010 saved on average $125 to $150 a month on their monthly mortgage payments, according to Freddie Mac.” While this may have been average, there are some homeowners who have been greatly helped by this initiative, yet in cases where homeowners saw a decrease of $125-$150 a month they may not have been able to benefit from this plan as well as they had hoped.
Essentially, what advisers are warning homeowners against when it comes to underwater refinancing is one of the same factors that some homeowners may not consider when they are using traditional refinancing methods as a way to get a lower interest rate. This problem that homeowners fail to factor into their refinancing equation is simply closing costs that may run into the thousands and, as a result, offset any benefits that a decrease in a mortgage rate and payment will bring.
Homeowners who are in a negative equity position are being prompted to explore state-specific plans, various federal underwater refinancing options, which include the Home Affordable Refinance Program, but there are also those who may benefit from speaking with a housing counselor from the Making Home Affordable Program, if they are unsure whether underwater refinancing will be helpful in their particular case. Yet, homeowners are, again, in a position where they can take advantage of these underwater refinancing plans but factors like closing costs or other fees must be considered as homeowners who are hit with a high amount of costs related to these refinancing plans or may only get a small reduction in interest rates, which could make underwater refinancing unhelpful and costly for certain homeowners.