Underwater Mortgage Refinancing Options From HARP–Why Some Homeowners May Not Benefit

Recent changes to the Home Affordable Refinance Program are hoped to bring benefits to the homeowners who have been struggling with negative equity over the past months or even years, but there are some aspects of this plan, which are predicted to help less than 1 million homeowners, but may still prevent some from taking advantage of this particular refinancing opportunity and, as a result, questions have arisen as to why some homeowners may not benefit and how changes that are in place are truly helping homeowners that are in need. Understandably, there are well over 1 million homeowners who may be suffering from negative equity as there have been indications over the past few months that almost 25% of mortgages are deemed to be in a position where negative equity is in place, but changes in the federal underwater refinancing program have eliminated certain fees and the loan-to-value limit that may have been hindering some in the past, yet homeowners do need to remember that some aspects of this plan and changes may make them ineligible.

As an example, homeowners do still have a maximum limit for adjustable rate mortgages, but one of the more common issues that homeowners may need to look into when it comes to this program is whether they will benefit from refinancing. Homeowners are not guaranteed a lower rate when this program is available to them, as there are homeowners who may have fallen into an area of financial distress, missed payments, or may simply not have a good credit score where today’s low mortgage rates will be and option for them.

However, homeowners do still have options that may be available from their state housing agency, or directly from their mortgage servicer, that may help address negative equity despite the fact that such options as a principal reduction had not been widespread nor used by every mortgage servicer. The Home Affordable Refinance Program can be beneficial for homeowners and, as it does include more individuals than previously may have been able to benefit from this program, homeowners do need to keep in mind that they will not always qualify for this particular refinancing option, but again, homeowners do have opportunities to make their mortgage payments more affordable even when negative equity is in place, and if refinancing may not be an option.

The Principal Reduction Alternative plan and some principal forgiveness options that may be part of modification agreements could bring some benefits to homeowners in a negative equity position but of course homeowners who are hoping to take advantage of this underwater mortgage refinance program do need to keep in mind that the type of mortgage they have, their financial position and ability to refinance to a lower rate, and their servicer may all come into play as to whether this particular option for underwater mortgage refinancing will even be available or helpful for their specific mortgage situation.