Last Tuesday, a new lifeline was thrown by the federal government to Denver homeowners. In an effort to help those who owe more on their properties than the homes are actually worth, the Federal Housing Administration is allowing lenders to offer these borrowers new, refinanced loans backed by the government. Participating lenders will be required to forgive at least 10% of the original mortgage amount, thereby giving a greater number of responsible borrowers the opportunity to remain in their homes.
The new program reflects a new approach by the Obama administration to address the foreclosure crisis, which, at first, was driven by sub-prime mortgages going delinquent, and now is being fueled by unemployment. The program is funded by $14 billion from the administration's existing $75 billion foreclosure-prevention program. A qualified homeowner's existing mortgage company receives incentives to lower the principal balance. The program will also reduce monthly payments for unemployed homeowners for up to six months.
According to the FHA, the following conditions (among others) must be met in order for a loan to be eligible for the new refinancing program:
- The homeowner must be in a negative equity position;
- The homeowner must be current on the existing mortgage;
- The property must be occupied by the homeowner as their primary residence;
- The homeowner must have a “FICO based” credit score greater than or equal to 500;
- The existing loan to be refinanced must not be a FHA-insured loan;
- The first lien holder must write off at least 10% of the unpaid principal balance; and
- The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 %.
The government estimates that between 500,000 and 1.5 million homeowners could be helped through the new program. Although more people than ever are facing foreclosure, there are alternatives. Are you a homeowner who wants to avoid foreclosure in Denver and needs to know your alternatives? Give the Bandy Team a call. We can help you explore the alternatives to foreclosure – including the new FHA refinancing program. Let us assist you in determining the best option for your situation.
Marianne Bandy
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