‘Underwater’ homeowners may get mortgage principal reduced

Some 33,000 homeowners across the country will be eligible to have the amount of their mortgage principal reduced under a plan recently unveiled by the Federal Housing Finance Agency.

This is a different plan from the government’s better-known HAMP and HARP programs. HAMP (the “Home Affordable Modification Program”) focuses mainly on reducing monthly payments rather than forgiving principal, while HARP (the “Home Affordable Refinance Program”) is designed to help underwater homeowners refinance their loans.

To be eligible under the new plan, owners must have a mortgage backed by Fannie Mae or Freddie Mac on which they had been delinquent for at least 90 days as of March 1, 2016. Their outstanding mortgage balance must be $250,000 or less, and the balance must be at least 15% more than the current fair market value of their home.

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