FHA Short Refinance Program For Underwater Homeowners–Questions Remain Over Availability For Homeowners

As reports continue to arise concerning potential new foreclosure prevention assistance plans that may become available in the coming weeks there are still homeowners who are looking at current programs that could potentially help them, but may have seen lackluster results. One of the more well-known programs that has been unable to help homeowners, but in the eyes of many had the potential to do so, has been the FHA short refinance program as this initiative was set to aid underwater homeowners by allowing them to receive a principal reduction and refinance into a more affordable home loan rate so that more affordability might be gained on the mortgage payments of troubled homeowners.

Yet, questions still remain over whether this option is still available, and if so how they may be able to participate in this particular program. It goes without saying that there are homeowners who could potentially benefit from this particular program since underwater mortgage difficulties have continued to creep into the lives of homeowners as a result of home price devaluation in many areas. The problem that homeowners face though usually centers around the fact that this program has been voluntary and, as a result a mortgage servicer having to forgive around 10% of the mortgage principal and then allowing homeowners to refinance into an FHA-insured mortgage, it has been unpopular among many banks and investors.

Many feel that it is no longer a viable option since there has been such a low level of participation and there is obviously opposition on the part of many banks to grant homeowners a mortgage principal reduction due to the fact that there are cases where homeowners can still pay their home loan. In fact, there have been some requirements for these programs that homeowners be current on their mortgage payments, which would obviously be seen as a negative from the point of view of a mortgage servicer since they would essentially be forgiving a mortgage principal percentage on a home whose homeowner can continue to meet their required payments on a monthly basis.

Frustration has arisen among homeowners who cannot afford their mortgage payment and are in a negative equity position, but there have been some options like the Home Affordable Refinance Program which may help in these cases, but there are some servicers who may be able to offer a modification in the hopes of helping homeowners find an affordable option when it comes to their mortgage payments. Yet, when the issue of reducing a mortgage principal is brought up this is where many banks lose interest in helping a homeowner through forgiving a portion of their principal, especially when they can make their home loan payment without any trouble.

It’s hoped that future plans or adjustments to current programs will help homeowners in this position as mortgage rates are currently at an incredibly low level and for homeowners who may be in negative equity position but would like to take advantage of a lower rate and potential lower payments, it’s obviously troubling when issues like negative equity and few refinancing options may prevent them from finding more affordability even though they are in an underwater position.