Homeowners have been struggling with underwater mortgages over the past months as home values have yet to increase in many areas, but have actually decreased in some places across the nation, despite the fact there are some improvements being seen in local housing markets. Yet, the outlook for housing in general has been quite glum and many feel that it will be into 2012 before any improvement is seen for homeowners who are struggling with the fact that they are paying on a home that is worth less than they owe on their mortgage. It’s because of this that homeowners have been looking for options to help them find more affordability on their underwater mortgage, as factors like negative equity and unemployment have arisen in the lives of homeowners which may make meeting these mortgage payments more difficult for some.
There have been some proposed plans to help homeowners with traditional home loans and there was a proposal by the FHA to help homeowners refinance when negative equity is a problem, but there are some issues which have arisen in these areas. Problems surrounding underwater refinancing have usually centered on the severity of a homeowner’s issues and the simple ability of a homeowner to get their servicer to work with them so that a negative equity refinance opportunity could take place.
Currently, homeowners are in a position where they may be able to qualify for the Home Affordable Refinance Program, which may help homeowners who have a mortgage that is owned or guaranteed by Fannie Mae or Freddie Mac, but homeowners who may not meet certain standards, like those who may have an FHA home loan, could potentially find this underwater refinance solution is unavailable. The FHA did propose its own refinance plan, called the Short Refinance program, but this initiative had very little steam in the early stages and really never got going as only a small number of homeowners facing a negative equity situation benefited from this program.
However, homeowners with either a traditional mortgage or an FHA home loan may still have options when it comes to refinancing their underwater mortgage or simply finding more affordable payments when negative equity is a problem. Homeowners who are working with a servicer that handles an FHA home loan will obviously have to talk with either representatives from their bank or the FHA’s servicing center, as there are some homeowners who may have had trouble dealing with a lender who might not have been following certain guidelines set in place by the FHA.
There are also still problems with traditional borrowers who may potentially qualify for HARP but as with other plans within the Making Home Affordable Program, not everyone has been able to benefit from opportunities to either get a payment reduction or principal forgiveness on their home loans. However, homeowners do need to still be aware of plans not only like the Principal Reduction Alternative, but there are some state housing agencies participating in the Hardest Hit Fund that may be able to address negative equity as well.
While these programs are in place to help homeowners at the present time, each individual situation may warrant specific attention or may not necessarily qualify for these plans, so homeowners who may have an FHA home loan or a traditional mortgage, among others, are often advised to start by contacting their servicer or a housing counselor with either the FHA or from the Making Home Affordable Program, as these plans that are in place to address negative equity issues will not be helpful for every homeowner’s needs, but in cases where negative equity is causing financial distress there are options that may help homeowners avoid foreclosure.