Hardest Hit Fund Principal Reductions For Underwater Homeowners–Plans That Offer State Assistance For Negative Equity

Underwater mortgages are still a major issue for numerous men and women across the nation and, even though some financial institutions have reported that they feel the latter parts of 2011 may bring more positive results for the housing market’s recovery, there are still financial institutions and officials who believe that housing has a long road to travel before any of the damage done by principal reductions or unemployment will begin to be repaired. Yet, when it comes to underwater home loans, as an example, this has been one of the more complex areas of the housing industry as homeowners who may simply be in a position where they can’t afford their mortgage payment have been helped by modifications, rate reductions, or simple decreases in minimum monthly payments and term extensions, but homeowners who are seeking principal reductions vary in terms of their ability to afford their mortgage payment.

Because this issue has still been so troubling though, the Hardest Hit Fund has instituted some options for homeowners in a few states where underwater home loan issues can be addressed, but there are still some banks and state housing agencies who are either unwilling to offer principal reductions or may still be looking at ways to apply this particular form of underwater mortgage assistance aid without facing opposition. As an example, it was recently reported that there are some banks in talks with state housing agencies who are working towards principal reduction options, as Arizona is one of these areas where they are still trying to come up with a proper agreement to implement a principal reduction plan.

What many major banks are working on, typically, is providing assistance to homeowners in areas where the Hardest Hit Fund is being implemented by addressing unemployment problems or helping homeowners who are behind on their mortgage payment to become current through these assistance plans. Furthermore, there are some banks who feel that simply reducing a homeowner’s principal does not necessarily guarantee affordability, when making a mortgage payment is the problem a homeowner faces, but there are banks that have gone so far as to say when homeowners can meet their home loan payment but have seen devaluation on their property, little assistance may be given.

Ideally, programs that offer principal reductions will work in tandem with other options to help make homes more affordable, but this has also raised issues as to whether homeowners in a good financial position who can’t afford their mortgage payment should also receive principal reduction assistance if they have seen the value of their home drop. Some major banks have offered principal reductions as part of their modification efforts, but some homeowners are asking for a substantial decrease in their mortgage principal amount even though they are able to still pay their home loan obligation.

Yet, principal reductions are still an issue that some banks are unwilling to address fully, but again, some state housing agencies are working with servicers in various capacities to offer this form of debt relief to certain homeowners. In cases where homeowners are having financial trouble, they can contact either their bank or state housing agency to inquire about specific programs in their state and what plans may be helpful for their particular situation.