An underwater mortgage can be a nightmare for responsible homeowners. There's nothing pretty about the prospect of owing your lender more than what your house is worth. According to a recent CNN report, nearly 8 million households are currently contending with this problem [update: as of August, that number has soared to 15.2 million underwater mortgages ] and many are walking away. But while leaving your mortgage behind may be a temptation, you might want to consider other options first. There are some programs available that may help you stay afloat.
FHA Programs for Underwater Mortgages
There are currently two FHA-run programs that may help homeowners save their underwater mortgage:
1) FHA Secure offers subprime borrowers holding non-FHA mortgages the option of refinancing into FHA-insured ones (with lower monthly payments) as long as the loans are in good standing and the borrowers have sufficient income to make payments.
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2) Hope for Homeowners (H4H) also keeps borrowers in their homes by allowing them to refinance into fixed-rate loans. To receive help, borrowers' mortgages must have originated on or before January 1, 2008 and their monthly payments must exceed 31 percent of their income.
Streamlined Modification Program
If you are at least 90 days delinquent in your monthly payments, then Congress' Streamlined Modification Program might be able to help. This program reduces your interest rates and/or stretches out your loan terms to make your payments more affordable. The catch, however, is that homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac will likely receive preferential treatment. To apply for the Streamlined Modification Program, you need to contact your current lender.
Remember, these programs do have specific eligibility requirements, so if you have an underwater mortgage but don't qualify, don't let that deter you. Try talking to your lender on your own. You may be able to refinance your loan at a lower interest rate, making your payments much more affordable.
