Underwater Home Loans And Decreasing Property Values–Are Some Homeowners Who Default Still Seen In A Positive Light?

Homeowners are still seeing situations where decrease in their property value are leading to a great deal of financial strain and frustration, despite the fact that there are programs currently in place to help homeowners handle underwater home loans and, recently, it was reported that governmental officials are hoping to pressure more financial institutions into offering further principal reductions on homes where negative equity is a problem. There are banks that do offer this particular type of assistance as some offer the forgiveness of a homeowner’s mortgage principle but not all servicers implement the same plans or offer the same type of assistance to homeowners in this position.

However, there are some concerns that a limited number of banks and lenders or view homeowners who default in a more positive light if they keep debts in other areas current. From a practical standpoint, these lenders see that a homeowner was facing a severe negative equity situation but rather than defaulting on their home due to their inability to pay, homeowners who have kept loan payments, credit card payment, or other debt obligations current even though they walked away from their home loan are being viewed as a safe risk by some banks even though these homeowners have simply defaulted on their mortgage.

Yet, what homeowners need to understand is despite reports that have stated this situation has occurred in some areas, defaulting can be an incredible setback for homeowners who may want to reenter the housing market after losing their home, so it may be better to explore a short sale option rather than walking away. Obviously, homeowners who are in a position where they can meet their mortgage payment despite being in negative equity situation are often those who grow frustrated as many servicers are unwilling to offer a deed in lieu of foreclosure plan or short sale agreement since a homeowner can afford their mortgage obligation.

What this means for some is that, if their servicer will not offer a principal reduction option, homeowners can either continue to make payments on their home loan, or explore options for more affordability like underwater refinancing plans, but there are homeowners who simply take the route of walking away as they feel they will be wasting money an investment that may never pay off. Yet again, officials are aware of these problems that homeowners have and want more banks to consider principal write-downs when a homeowner is either in a position to benefit from forgiveness or have diligently paid their mortgage payment despite being a negative equity situation.

However, these options will not necessarily be available for all as they are largely voluntary, but again, some homeowners do receive rewards from their bank by continuing to pay on their home loan by being in a negative equity position and facing a great deal of room where their home value needs to recover.