Opportunities that homeowners have to address their underwater mortgage has been a topic that many have focused on over the past weeks as there is hope that changes to current programs or new initiatives may be put in place to help deal with the continued problem of negative equity being seen in the housing market. However, some homeowners fail to realize that certain banks may offer forgiveness on their principal if they continue to meet mortgage payments in cases where homeowners are current on their loan and can make the payments affordably.
The problem of strategic default has been an issue since negative equity difficulties arose but there are servicers who are willing to reward homeowners in this aspect, particularly if they have seen the devaluation of their property but continue to make their payments in a timely manner. Yet, this is not something that all homeowners have at their disposal as there are some banks who are unwilling to offer principal reductions, particularly in cases where homeowners can make their mortgage payment without trouble. In instances where a homeowner may benefit from a decrease in their mortgage principal, some banks may use this particular tool along with payment reductions or modifications to help homeowners avoid foreclosure, but the situation becomes more problematic when homeowners are in a good financial position and can pay their mortgage.
Homeowners in the federal Making Home Affordable Program may be able to get a small percentage of their principal forgiven as part of this initiative, but again, this is where homeowners need to speak with representatives from their servicer to see what options are offered. In some cases, homeowners have called their servicer multiple times to inquire about this option, as some banks may discourage principal reduction programs but will offer them to homeowners who continue to honor their mortgage payment despite seeing a drastic value drop.
In some instances, state housing agencies have also set in place programs to offer principal reductions for homeowners, but what many in a negative equity position have seen is that unless there is a risk of default or foreclosure, the opportunities to have their principle reduced may be slim. Also, homeowners looking to refinance for a more affordable payment and rate on their home have also had trouble when negative equity is in place, but it’s hoped that program changes that may be on the horizon will address these issues as well.
In the end, it seems that homeowners who are current on their mortgage and are looking for principal forgiveness on an underwater home loan may be at the mercy of their service are, but homeowners do have the opportunity to simply contact their mortgage servicer or even a housing counselor to see what programs may be available for their situation or in their state. Homeowners should keep in mind that principal forgiveness is not easy to come by but in some cases, banks have reportedly offered aid to those who are continuing to make their mortgage payment on time but have seen the value of their home drop below what they still owe on their mortgage.