Getting A Mortgage Principal Reduction–What Homeowners Need To Aware Of When Exploring Programs And What Their Servicer Offers

Homeowners who are seeking a mortgage principal reduction may be finding that there are some options which could work to their advantage as there are specific programs available not only in certain states but within certain servicer programs that may help homeowners find lower mortgage principal options when negative equity has become a problem. Common plans like the Hardest Hit Fund and the government’s Principal Reduction Alternative plan have offered some homeowners a reduction in their mortgage principal but homeowners do need to be aware of the fact that these programs may not be widely available and it will depend on a homeowner’s servicer as to what options could help an individual or a couple who happen to be in a home that is facing devaluation and currently underwater.

Homeowners have begun to ask what they may be able to do if their servicer does not offer principal forgiveness or reductions on underwater mortgages, and sadly there are a few options that may be open if a servicer will not agree to principle forgiveness on a home where the property value has dropped. Yet, there are some plans that are being proposed by specific servicers that may allow for a homeowner to get a percentage of their mortgage principal forgiven if, when they sell their property at a later time, some of the profits will go to investors who have allowed is principal reduction.

It comes as no surprise to some homeowners that when it concerns reducing mortgage principles on certain homes, many banks maybe in a position where they either feel this is not an option they want to use or they may be beholden to what investors want. There are some cases where homeowners stand to benefit from mortgage principal reductions and may be able to avoid foreclosure if certain combinations of affordability plans and principal forgiveness are used but this is obviously not going to be the case for every homeowner.

In instances where homeowners are facing negative equity and may run the risk of losing their home due to their inability to pay the mortgage, servicers may be willing to work out some sort of agreement, but this does not necessarily mean that homeowners will get a principal reduction as a result. While there have been some homeowners who are seeing percentages of their principal forgiven or even their second lien on their home loan extinguished, homeowners do need to understand that this is not something every servicer will use nor is it available in every case, but it’s worth exploring if homeowners are facing financial difficulties related to personal factors and negative equity.

Talking with representatives from a mortgage servicer or approved housing counselors from HAMP may help homeowners to better explore these options and what specifically may be available for a homeowner’s particular situation. Currently, there are fewer buyers in the housing market than banks would like to see so as a way to avoid foreclosure or having homeowners walk away from their home and simply leave the property sitting empty, more banks might be willing to work with homeowners in a negative equity situation, but again there are no guarantees when it comes to who will be helped through principal forgiveness or which homeowners may have to settle for other foreclosure prevention assistance options.