Some homeowners who are in a position where they have seen the equity on their home drop and are now in a position where they owe more on their home than it’s actually worth have been seeking principal forgiveness options, but some servicers are unwilling to offer this particular type of assistance to underwater homeowners despite the fact that home values have continued to drop in some areas across the nation. Since the forecast for home prices is bleak in some areas, there has been a call by homeowners for more negative equity refinancing or principal reduction opportunities to be made available as a result of not only devaluation in the housing market but the unlikely chance that home prices will rebound substantially in their future. Also, some servicers may use a principle forbearance simply as a way to help bring a homeowner’s modification plan to a more affordable level, meaning that homeowners need to be aware of a potential balloon payment that could come after their loan is paid off.
However, when homeowners are not afforded these refinancing opportunities or principal forgiveness options, this has led some to either walk away from their home or question why they are continuing to pay on a mortgage that is worth much more than a home, coupled with the fact that their home’s value may not return to its original price in the coming years. Yet, some homeowners who are simply in a position where principal payments have become a problem and forgiveness is not available, there are some principal forbearance programs that can not only help homeowners in an underwater situation but those who have fallen behind on their mortgage payments.
While homeowners who are financially distressed, have missed mortgage payments, and are looking for ways to avoid foreclosure are usually those that have these opportunities available, principal forbearance can work for homeowners who have missed payments simply because it will allow a homeowner to delay making payments on a percentage of their home’s mortgage principal until a later date when they may have more financial security. While homeowners who are in a negative equity position may not see this as the most optimal of choices, it can be helpful for those who are underwater on their home loan and behind on their payments as well, as this will allow homeowners to avoid foreclosure and hopefully gain a payment plan that is more affordable rather than having to catch up on missed payments.
Also, principal forbearance can be helpful simply for homeowners who have fallen behind on mortgage payments as a result of unemployment, health issues, or cutbacks in their income but are now in a position where a modification or payment assistance plan could help from this point forward but in cases where these individuals can’t pay what they owe on missed payments it could be helpful to push these delinquent payments to the end of a homeowners mortgage payment agreement.
It should be kept in mind though, principal forbearance is not always used by servicers and in some instances may only be available for homeowners who have missed payments due to financial hardships. While not all banks may use this option, homeowners may find that their servicer does offer a similar program or their state housing agency may have plans in place to help in a similar capacity, yet it remains certain that negative equity is an issue that homeowners want to be addressed in a more comprehensive way so that potential programs or changes to current assistance options may be more helpful at aiding homeowners who are severely underwater and looking for mortgage debt relief.