According to the LA Times, economists consider high loan payments on homes that are less than the mortgage as a risky position for investors because of the likelihood of loan default. The LA Times explained that homeowners in this type of financial situation often feel hopeless and trapped by the poor decisions they made during the housing boom. The underwater mortgages are most likely to default and add to the rising foreclosure rate.
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President Obama, in his address to Congress last week, said that helping homeowners refinance their loans could free up a considerable chunk of spending each year for families. Home loan rates have fallen to historic lows amid concerns the economy is sinking again. In response, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said last week that it would review its policies to see if more homeowners would qualify for the administration’s Home Affordable Refinance Program.
This government loan relief program is only offered to borrowers that have mortgages originated before June 2009 and owned or guaranteed by Fannie Mae or Freddie Mac. Read the original LA Times Article
