There have been reports that home prices decreased in some areas during the second quarter and forecasts for housing prices are not looking that positive, as there are some officials and organizations who believe that home prices could continue to decrease into 2012. However, for homeowners who are facing underwater mortgages as a result of these home value decreases, delinquent homeowners may have help through the Principal Reduction Alternative initiative that has been used as a part of the federal Making Home Affordable Program.
Also, recent reports from the Treasury Department had indicated that there were increases seen and this particular program, which may help some homeowners find alleviation from their negative equity situation. Yet, homeowners do need to remember that this particular program is not a guarantee and will not necessarily help homeowners whose servicer may be unwilling to either offer a principal reduction for their specific situation or use principal reductions as a large portion of their home loan affordability efforts.
As an example, there are some banks that feel principal reductions are not necessarily beneficial in terms of helping homeowners find affordability, but in cases where homeowners are simply looking for forgiveness of their mortgage principal due to the devaluation their property has seen, some of these banks are also of the mind that homeowners who can pay their mortgage should not be offered a principal reduction at the present time. However, there have been some officials who feel that homeowners need more help from their banks in relation to finding solutions for underwater home loans, but this Principle Reduction Alternative plan may offer some solutions for homeowners, as it has helped some in the past.
According to Treasury reports, the total number of trial modifications that are currently active that have this Principle Reduction Alternative program in place stand at 18,195, as of the month of June, and this is an increase from the PRA trial modifications that were currently active in May which stood at 16,017. Also, the number of permanent modifications that are currently active with a Principal Reduction Alternative as part of the agreement numbered at 6,941 in June, which again was an increase from 4,911 in May.
Some homeowners are seeing average principal reductions of around 30% with this particular plan, but again, this program is not a guarantee for homeowners who are seeking a reduction in their home on principle, as some banks may have in-house efforts to help homeowners deal with their mortgage principal, while other banks may be less willing. Obviously though, homeowners who are delinquent on their home loan may stand a better chance, in most cases, of finding a solution to their mortgage payment troubles than homeowners who are simply in a negative equity position and want a principal reduction as a result.
While delinquent homeowners with negative equity may have opportunities for mortgage payment assistance, which essentially a lower amount on their mortgage payment, it does need to be remembered that principal reductions are not always included in these agreements, so homeowners should speak with their servicer or a housing counselor if they are in need of mortgage payment assistance on their underwater home loan, but may also benefit from a principal reduction as well.