Many homeowners are aware of the equity problems that are being seen across the nation, as there are numerous households who are still not only suffering from an underwater mortgage but there are predictions that home values may decrease further in some areas throughout 2011. While there are some places that have seen increases in property values, some homeowners have seen a substantial drop in the value of their home when compared to what they owe on their mortgage and this has obviously created situations that have made some homeowners so frustrated that they have walked away. Yet, recently it was stated that officials are going to prompt more financial institutions that service these home loans to offer principal reduction plan due to these prolonged housing price problems, but no servicers have been required to reduce a homeowner’s principal when negative equity is in place.
It’s hoped that these financial institutions will help distressed homeowners who are facing severe negative equity, as again, there are some who are concerned over the amount of defaults that are being seen as a result of a homeowner being in a position where negative equity is a problem. While there are programs that can help homeowners facing an underwater home loan and mortgage payment issues, but in cases where homeowners are current on their mortgage payment despite being in negative equity situation, solutions to their problems are a little more uncommon and might not be available from certain banks.
However, there was a recent idea proposed by one mortgage servicer, Ocwen Financial, that is hoped to gain popularity and potentially be used on a wider scale. Essentially, this opportunity for a home loan modification would offer a homeowner a mortgage a principal write-down and in exchange for forgiveness on part of their principal, homeowners who sell or refinance their home at a later date will share in the profits they have made resulting from the appreciation on their home.
There are those who hope that this option may be one route that servicers use, if it does indeed prove to be successful, as some of the hurdles that banks must overcome when forgiving a mortgage principal is investors that may have to approve of mortgage principal forgiveness if a homeowner is facing negative equity issues. Yet, when it comes to principle forgiveness options, there are different routes that homeowners may be able to use depending on their state and servicer, but there are instances where homeowners who are looking for a principal write-down on their mortgage may simply have to contact their servicer to inquire if this option is available for their particular situation, as again not all banks have participated in principal forgiveness programs that are presently in place.