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What programs can help with an underwater mortgage?

If your mortgage is "underwater," it means that you owe more money on it than your residence is actually worth. This can happen to homeowners who take out a loan and buy a property before the real estate market starts to change for the worst. When property values decline, you could find yourself dealing with an underwater mortgage.

The federal Making Home Affordable (MHA) Program can assist you via three different programs if you currently have an underwater mortgage. These three programs are:

  • Home Affordable Refinance Program (HARP): For people who have not been able to refinance their homes because their mortgages are underwater, HARP offers refinancing options. If you qualify for this program, you may be able to get a more affordable and stable home loan.
  • Principal Reduction Alternative (PRA): For those people whose homes have fallen to a value that is severely below what they owe on their mortgages, PRA offers encouragement to mortgage servicers to give the homeowners a break and reduce how much money they owe.
  • Treasury/FHA Second Lien Program (FHA2LP): This applies to homeowners who have a second mortgage and whose first mortgage provider agrees to carry out an FHA Short Refinance. This may be a way to either eliminate or reduce your second mortgage. If your second mortgage provider agrees, your new refinanced mortgage will not be more than 115 percent of the value of your home.

Are you dealing with a home that has an underwater mortgage? A real estate lawyer can help you review your legal rights and options for keeping your residence.

Source: U.S. Department of Housing and Urban Development, "Avoiding Foreclosure," accessed Oct. 01, 2017

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