The issue of underwater mortgage principal reduction is still one that many homeowners are bringing up, pursuing, and proposing that options be made more available as individuals who are in a position where they are facing negative equity on their home are also finding that a simple reduction in their mortgage principal is not always available. While there are some programs currently in place by federal agencies, like the Treasury Department’s Principal Reduction Alternative plan, there are still being calls made in certain states for principal reductions, as we have recently seen California urging principle reductions on certain types of mortgages, as this particular state has seen a great deal of problems in terms of home equity decreases and homeowners simply struggling to make ends meet.
While there are some states that are working to help homeowners in their area, there have also been calls in the past and, still to this day, for more national options to be made available like programs similar to modification plans that may help more homeowners with a variety of servicers, in various states, and facing different situations. Obviously, we have seen instances where homeowners cannot pay their home loan, and recent changes to the underwater refinancing initiative are hoped to help this problem in some ways, but homeowners who are simply facing a substantial amount of negative equity, in relation to what they owe on their mortgage, have been incredibly frustrated over the past years.
What we have seen though, when the discussion of principal reductions has arisen is that many officials and financial institutions are not necessarily rushing to offer any solutions to the demand for principal reductions, as again there are a great deal of complex aspects of principal forgiveness that some homeowners feel must be addressed, and there are also arguments that in cases where homeowners may not have faced negative equity, forgiving principles on some homes but not others is simply an unfair practice.
However, many areas where foreclosures continue to take place, houses simply sit empty, and even unemployment remains a problem, we are seeing negative equity still remain an issue and for homeowners who are able to get by with their mortgage payments, even these individuals have a problem when it comes to paying much more on their home than it’s actually worth. Again though, programs like the Principle Reduction Alternative plan, some proprietary options, and even aspects of the federal home modification plan may offer somewhat of a reduction on homeowner’s principle, but plans being proposed in certain states and calls for more national options for homeowners to see substantial forgiveness in terms of their mortgage principal are still present as, once again, even principal reductions that are offered in some cases may not be of an amount that is substantial enough to do much good in terms of helping homeowners in severely underwater homes see some relief.