The subject of mortgage principal reductions is far from new, but earlier here in June it was stated that more homeowners who are seeing the value of their mortgage decrease are looking for further options to help them find affordability and avoid the loss of their home, but when it comes to using principal reductions, there are some who feel that this practice is not widely implemented, but may be of help. Obviously, there are a great deal of mixed opinions on the topic of reducing a homeowner’s mortgage principle, as many who are facing negative equity may be in a situation where they are simply in an area where home loan values have been plummeting or are in a situation where they may be suffering from the inability to pay their mortgage as a result of errors on their part, but are also seeing their situation made worse by negative equity.
Traditional home loan modifications can offer somewhat of a principal reduction, but there are programs like the Principal Reduction Alternative initiative that can help homeowners find a lower mortgage principal in cases where severe equity is present. Also, programs like the Home Affordable Refinance initiative and the FHA’s short refinance plan have been in place for months now, but when it comes to simply receiving a principal forgiveness opportunity or even qualifying for one of these plans, homeowners still face problems with some servicers.
Typically, banks are not required to reduce a homeowner’s mortgage principle, even if they have lost a substantial amount of value in their home, but many are working to find more affordable options in terms of the mortgage payment a distressed homeowner may face. Yet, for some homeowners this has not been enough and requests for principal reductions have been made by a variety of individuals, who are struggling under the weight of their mortgage at the present time.
Despite the fact that there are some positive signs that have been seen in the housing market as of late, like opportunities for a lower mortgage interest rate, homeowners who may be in a position to make their home loan payment are growing more frustrated in areas where the devaluation of property has continued and there seems to be little hope for recovery in the near future.
When it comes to homeowners who have received principal reductions though, it really depends on what servicer a homeowner works with and their particular mortgage situation as to whether they will receive some form of forgiveness on their principle. There are some banks that are offering principal forgiveness options for homeowners who can continue to make their payments in a timely manner, but others feel that if a homeowner is in the financial position to pay their mortgage obligation, they do not need the mortgage principal reduced, as the issue of affordability is what is at the forefront of this topic. There are some homeowners who feel they deserve a principal reduction, while others are of the mind that homeowners should simply have to pay what they originally owed, but again, homeowners in a position where mortgage payments are causing problems may have a better opportunity at finding solutions currently, and even some of these plans may offer a reduction in a homeowner’s principal if their servicer deems it necessary.