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Underwater mortgages: The condition and the cure

Do you know what an "underwater mortgage" is? Maybe you know exactly what it is and you're sorry that your home is currently worth less than the amount of money you need to pay on it. With the current state of the Texas real estate market, there could be many homeowners who -- after their homes declined in value -- owe more money on their homes in mortgage loans than their homes are actually worth on the market.

Here are some government programs that the holders of an underwater mortgage might be able to benefit from:

  • Home Affordable Refinance Program (HARP): This program is for homeowners who are up-to-date on their monthly mortgage payments but can't refinance their homes due to a significant drop in the value of their residences. HARP is a government program that might assist you to refinance your home with a more stable mortgage.
  • Principal Reduction Alternative (PRA): This program helps the owners of underwater mortgages to get their mortgages under control by encouraging investors and loan servicers to reduce the amount that the homeowner owes on his or her mortgage.
  • Treasury/FHA Second Lien Program (FHA2LP): This program can help people who have second mortgages and whose original mortgage provider is willing to participate in an FHA Short Refinance. You might be able to eliminate your second mortgage if you qualify. Participants in this program cannot have mortgage debt in excess of 115% of the value of their homes.

Owning an underwater mortgage is a particularly difficult situation to be in if you're suddenly unable to afford your mortgage payments due to a change in financial circumstances. The problem is self-evident when the homeowner tries to sell his or her residence, but can't get enough money to pay back the mortgage company and be free of the debt. However, by working with a Texas real estate lawyer -- and possibly benefiting from one of the above programs -- homeowners might be able to find the debt resolution solution they need.

Source: hud.gov, "Avoiding Foreclosure," accessed Sep. 01, 2017

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