Latest News Regarding Underwater Mortgages

Recently, we produced a series about underwater mortgages – everything from what an underwater mortgage is to how to find underwater mortgage help. In case you missed it, here’s a recap along with the latest news so you can stay up to date.

Number of Underwater Mortgages Dropping – But Still High

In August of 2009, we published an infographic demonstrating the underwater mortgage situation across the nation. At the time, close to a third of all homeowners owed more on their mortgage than their home was actually worth. That was more than 15.2 million mortgages in total.

Today, the number of homeowners struggling with an underwater mortgage has eased a bit, though the situation is still less than ideal. The research firm that monitors housing equity, First American CoreLogic, reported the latest findings earlier this year. According to CNN Money, the firm concluded that a quarter of U.S. mortgages, or 11.3 million homes, were still underwater at the end of 2009.

Government Pushing Mortgage Principal Reduction

A few underwater mortgage holders have found some financial relief by refinancing with the Making Home Affordable Program and getting their payments lowered. Many more, however, do not qualify for a home mortgage refinance and are left to struggle to avoid foreclosure.

Mercury News explains that banks are still reluctant to offer principal reduction, though “smaller, temporary modifications, such as interest-rate reductions, do nothing to address the epidemic of borrowers who owe more than their homes now are worth.” While the government has no authority to force lenders to reduce the principal balance owed on underwater mortgages, the Treasury Department is attempting to encourage the practice with financial incentives.

Workshop for Underwater Homeowners on July 24th

A press release from Short Pay Access announces they will be holding a special workshop for homeowners with underwater mortgages at the Radisson Hotel San Jose Airport in San Jose, California.

The event will cover the topic of a short-pay finance, which is supposedly a new option that “allows qualified homeowners to keep their home, lower their principal loan balance and mortgage payments, while at the same time helping them avoid a possible foreclosure or bankruptcy.” The information is meant to benefit both homeowners and lenders dealing with underwater mortgage problems.

Don’t Walk Away From Your Mortgage

Some homeowners with underwater mortgages have simply decided to give up their homes, deliberately defaulting on their loans and allowing their homes to be defaulted upon rather than seeking assistance.

While this may seem absurd and morally questionable, Morgan Stanley recently reported that as of February, homeowners who could afford their mortgages yet chose to walk away accounted for 12 percent of all U.S. mortgage defaults.

Bloomberg Businessweek details these findings and explains Fannie Mae is ready to penalize borrows by denying them new mortgage loans for seven years following the date of foreclosure. Fannie Mae’s executive vice president for credit portfolio management,Terence Edwards, was quoted as stating, “Walking away from a mortgage is bad for borrowers and bad for communities.”