Underwater Home Loan Refinancing Options For Homeowners–New Plans Proposed And The Status Of Current Assistance Programs

The problem of negative equity and the topic of underwater home loan assistance has been ongoing over the past months, and since many homes saw decreases in their equity over the past years, there are some homeowners who are facing long-term problems related to this issue which may be addressed with new plans that have been proposed, but sadly, there are current issues surrounding underwater refinancing options and programs that homeowners previously had in place which have had very little effect on the problems that homeowners currently face.

When negative equity is an issue, homeowners are usually looking for principal reductions, but when it comes to finding more affordability, some may have overlooked options like the Home Affordable Refinance Program which has been an extension of HAMP specifically designed to help homeowners in a negative equity situation. Yet, there are new plans, through current legislation, that are being proposed in the hopes of helping more homeowners who are current on their mortgage and may benefit from refinancing.

It’s common knowledge that homeowners who are in a negative equity situation are unable to traditionally refinance and, with current interest rates being at low levels, some homeowners are missing out on the opportunity to find more affordability, in terms of their mortgage interest rate and home loan payment, but there have been some hindrances for homeowners in an underwater situation which may have stopped them from being able to take advantage of underwater refinancing when their home is owned or guaranteed by Fannie Mae or Freddie Mac.

While negative equity is something that many homeowners have resigned themselves to, due to the fact that there are problems in the housing market which have kept home prices low in some areas, but there are some positive signs being seen in certain areas of the country in terms of increased home prices as well. Essentially what this means is that there is a great deal of instability and uncertainty in the housing market related to home prices, and for homeowners who are continuing to make their home loan payments but are facing negative equity, it would be helpful if some relief could be offered in terms of refinancing for a lower rate.

Recently, President Obama stated that they hope to press mortgage servicers to make more modifications and principal reduction plans, but there have been some options like the FHA short refinance program that have fallen short of helping a wide number of homeowners due to the lack of participation by banks. There are officials who feel that for the FHA short refinance initiative, some of the requirements like principal reductions and refinancing the loan to an FHA-backed mortgage were what made this particular route unattractive for some financial institutions when it came to offering homeowners underwater assistance, but it’s hoped that with efforts that are still in place and these new proposals, problems related to negative equity and the ability of a homeowner to refinance for more affordability will bring more solutions to homeowners in this particularly difficult position.