' Underwater ', in this context, refers to homeowners who owe more on their mortgage than their home is worth.  Earlier this month, the U.S. Department of Housing and Urban Development, known as HUD, provided details on a new program that will enable lenders to provide special re-financing options for certain ' underwater ' non-FHA borrowers who are experiencing financial hardships. The current lender must agree to write-off at least ten percent (10%) of the unpaid prinicipal balance of the first mortgage, related to declining properties values in their area.  Set to start September 7, 2010 ...  FHA Short Refinance ... offers a way to overcome negative equity problems when hoping to refinance, and be given the opportunity to qualify for a new FHA-insured mortgage. In order to be eligible for this refinance option, the homeowner must owe more on their mortgage than their home is worth, and MUST be current on payments for the existing mortgage;  homeowner "must qualify for the new loan under standard FHA underwriting requirements, and a credit score equal to or greater than 500."  Information on the qualifications can be found on the HUD web site www.hud.gov  This program was originally announced in March.  Please review the specific details on the HUD website to see if you may qualify, then contact your loan servicer to ask if they participate in this program and how you can apply.