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Here It Is... The New FHA Loan Program - FHASecure - Mortgage Lates and 100%+ CLTV Allowed

Earlier today, I wrote about the President's new game plan on the mortgage crisis. George W Comes to the Aid of The Mortgage Mess - Are The Tides Finally Turning??

By day's end, FHA announced their new plan to help nearly 250,000 people save their home from adjustable rate mortgages that reset too high.

Here are the highlights of the FHASecure Initiative:

1. The mortgage being refinanced must be a non-FHA ARM that has reset. Your loan must have adjusted already to be eligible.

2. The mortgagor's payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments. You can be late on your mortgage but you must prove that you were not late prior to the reset and that the reset is the only reason why you have lates now.

3. If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments. If you are on a plan with missed mortgage payments that need to be paid, they can be rolled into your new loan, so long as you have enough equity.

4. Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2), the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing.

Let's say you owe $300,000 on your home but its only worth $270,000 today. You can get a new FHASecure loan for $261,900 and a new loan for $38,100 from your new lender or the current holder of your mortgage if they will go for it. This new note terms and payments have to be factored into your qualifying ratios but if they are deferred for 36 months, they don't have to be. These combined loans can exceed 100% and can exceed the FHA loan limit in your area.

5. Lenders must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor's inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage.

The bottom line is this is not a free pass. If you are late only because your ARM adjusted and you can prove it, this program is the best way to save your home and your credit.

However, this is a terrific new program and once again demonstrates why FHA has been with us for decades.

UPDATE: AS A FOOTNOTE TO THIS POST, I GOT MY FIRST FHASECURE LOAN APPLICATION A FEW DAYS AFTER I WROTE THIS.

You can follow the progress of this loan as I am keeping an online diary of it. The first post is here: FHASecure Diary Part I - I Took My First Loan App For an FHASecure Loan - Let's Be "Guinea Pigs" Together Saving Alfredo's Home

Posted by Aaron Gordon, Home Loan Consultant, Las Vegas, NV on 08/31/2007 07:54 PM

Comments (63)

fha, fhasecure

63 Comments on Here It Is... The New FHA Loan Program - FHASecure - Mortgage Lates and 100%+ CLTV Allowed

AUG

2007

Thanks Aaron... Great blog and Great read

Thanks, Christina!

Way to keep your ear to the ground, Aaron. Do you know any wholesale investors for this?

That is...unless you work in every state...email me privately.

Joey--- I am a direct lender so I dont know but my bet would be anyone of them that is approved with FHA.

Joey--- I do work in every state as well. :) But you can make more going direct to your wholesale FHA bank.

Hey Aaron,

Were did you get your information? I'm just curious.

Sean Allen
The Mortgage Professionals
www.TheMortgageProfessionals.biz

Sean--- I got an email from our friends over at HUD but its on their website as well. www.hud.gov

Thanks Aaron

Sean Allen

Thanks for the answers...we are a direct lender, but don't like keeping the FHA loans in our portfolio.

Thanks for the update. What about the loan limits. California is going to burried without higher loan limits and if Stated Self Employed goes away.

Thanks for the explaination, it sure helps to know the options.

Hey Aaron,

Did they mention anything about raising the loan limits currently set by FHA?

Sean Allen

Joey--- Totally understoond!

Andrew--- I think that component is next. Higher FHA loan limits is right around the corner.

Linda-- You are welcome.

Sean-- That is next. That has to be passed by Congress but its already in a bill.

This sounds good. We'll have to check this possibility out first before we list a short sale. Hopefully we can keep some people in their homes with it.

Lets see if it really comes to pass, after all it is not real yet

Joe--- This program is effective immediately. http://www.hud.gov/news/release.cfm?content=pr07-123.cfm

The raising of the limits is not but most people on the Hill are confident it will pass. The backlash of rejecting it is too severe.

Susan--- You have a tremendous amount of integrity. Let's hope all agents think the way you and help educate the client instead of hiding this possibility to get the listing.

I was wondering if I could link to your explanation on my blog outside of Active Rain? You explain it far more eloquently and easier to understand than I ever could. I would like my readers to read this.

Interesting--so does this mean that ONLY someone who is late can get the benefit. What about someone who will be in a hardship "when" the loan adjusts higher? Do they then have to be delinquent in order to get in the program?

Karen--- You you can. I would be honored.

Diane--- Keep in mind this just came out today so no one has done this mortgage yet but the way I am interpreting it is that it has to have reset. That doesnt mean you have to let it go late. Once it resets, you can refinance out of it into this program. I would suggest that people get into a loan officer in the month before the reset, and then time the closing to occur right after it does adjust.

Great explanation. Most likley a better understanding than the media.

Yes this is a great program and well deserved for those who really need it because of the massive monthly payment increase from the adjustment on their ARM

My 5yr ARM will adjust in 10/08, it can go up a full 2% every adjustment year with a cap of 6% total increase. Who decides whether or not I can afford the new rate of 6 1/8 when it adjusts in 10/08 ? Do they use the ratio of mortgage payments and other debt to monthly income? What assets do they look at, like IRA's, 401(k) ?

I qualify based on the 5 criteria identified in the FHASecure program, am I missing some other requirements?

Thank you.

Thankyou Aaron!

Aaron,

Thanks for the update, I just got done listening to the full George W. address from this morning. Thanks for sharing this so soon. I am now just waiting for my company to make it ready.

SEP

2007

Good post. Thanks for the information. Appreciate it.

I always learn alot from your posts Aaron.............Thanks.

Duane Hosek in the Black Hills of South Dakota

Thanks much for the timely update. I count on brokers like you to keep me informed during this market and you wrote a great, easy to understatnd post. Thanks!

Thanks for the good find. I had poked around a little in my free time and didn't see that announcement. I really figured that we wouldn't see anything right away.

NOW, let's see what Congress does....

I didn't realize they'd be releasing the program so quickly, although I'm sure it will take lenders a bit to roll it out. Great info as usual Aaron!

Eric--- It helps that I have a journalism degree. :)

Leo-- Exactly. I am sure we will see even more solutions as well.

Joe-- Its sounds like you probably qualify for the program in October 2008. The debt to income ratio on an FHA can be flexible based on the overall strength of the file.

Gary-- I believe it is ready now. Start selling that on Tuesday! :)

Bob and Carolin-- My pleasure!

Duane-- Thanks! That means a lot!

Phylena-- My pleasure! We have a good relationship with the local HUD office and were very surprised to get the email so soon after Bush's announcement as well.

Diane--- You are welcome. Glad to help!

Tom--- I was surprised at how quickly that came as well. There will be big pressure on Congress now to not drop the ball with the momentum that HUD, Bernanke and Bush have built this week.

Gareth-- No question. Its going to take a few days for us all to get our arms around this. That first one in should be interesting for the underwriters I can imagine.

Great information, thanks for the details. Wow - it's really ready now. I thought that they were still working out the details!

Kate--- The press release and program email I got said "effective immediately." They may not move very fast but when they do are ready. I believe I read somewhere that they thought this would help 60,000 people now through the end of the year.

Aaron,

This is a great program, and I hope it goes as planned.. We need it for so many out there.

Tom Weiss

Tom--- I think it will. The big question is how many will this help? I think Fannie and Freddie changes are right behind it as well.

Yes this sounds great but i was reminded of the years when Pres. Bush was Governor of Texas and this same situation occured but only all the refinances were declined by the banks and the foreclosure rate was the largest in the state ever! How do we know we will be able to refinance our preforeclosed homes in order to save them, and be approved by the bank. Will we be able to short sale the properties to ourselves at a lesser than what we paid for amount?? Thanks, i enjoy this site and your posts.

Kristina

Kristina--- Thanks for the kind words!! I dont think they are going to let you short sale your home to yourself. The new guidelines for the FHASecure loan are pretty simple.

For one you have to be able to qualify FHA based on your income and non-mortgage credit. Now, if your adjustable rate mortgage has reset, and this caused your payment to jump, and this sent your home into pre-foreclosure, and you can prove that you were not late on your mortgage before this reset, you are still eligible.

The challenging part about being in pre-foreclosure will be that you are probably a few payments behind. So, the new FHA program will allow you to roll these missed payments into the new loan if there is enough equity.

If there isnt enough equity, you now need to find a lender, and it may be the one who currently has the loan, to give you a second mortgage behind the new FHASecure loan. FHA will allow these loans to be over 100% of the value and will allow the second loan to throw it over the FHA loan limit in your area.

Sounds great! However, how many lenders are going to be writing these second mortgages with no equitable security? That's the big unknown here. To avoid foreclosure, there may be more than we think.

/Thank You Aaron, I'll definitely look into this and refer this to our clients. I hope it all works out.

oK, I HAVE TALKED WITH OUR BANK ABOUT A REFI TO OURSELVES OR MY SPOUSE WHO IS NOT ON THE MTG. BUT ON THE TITLE AND THE BANK SAID TO GET APPROVED FOR A MTG. AND THEY WILL ACCEPT THE REFI. I APPRECIATE ANY MTG. OFFICER WHO WOULD WANT TO GIVE IT A TRY.

KRISTINA

Kristina--- Email me privately. i am licensed in Florida and would be glad to take a look for you.

Hi Aaron. I just found out about this initiative. Thanks for the details!

Thanks Aaron this info will be usefull. Another reason why I am glad I am a AR member!!!

AAron, it sounds like this can save a lot of potential disaster. Is this a good income source for lenders?

Ilyce---My pleasure!

Shannon- You are welcome. I love the info on this site and I am happy to help as well.

Suzi--- I think this is amazing opportunity for lenders if marketed correctly.

This is the only place I have heard about this. Thank you. It is great information.

Margaret--- You are welcome. Glad to share.

SEP

2007

Here is a link I think worth viewing, http://www.whitehouse.gov/news/releases/2007/08/20070831-4.html.

Toby--- Its good information about all of the layers that they are working on.

Thanks Aaron. I will pass this along to a my customers.

Steve--- Sounds good. Its a great idea.

Does anyone know what the credit score requirements are for this new Secure loan? Does FHA set the credit score guidline or will this be up to the lenders?

Thanks for all the good info!!

Kevin There is no score requirment for this program

SEP

2007

Kevin--- John answered it for you. Its not credit sensitive...especially now that they will let you count mortgage lates on this new program. Those will cause your score to plummet.

SEP

2007

I'm not certain what the retail impact of this will be. I believe this is really geared to mortgage servicers to be able to take loans that are in their default/loss mitigation department and find a way to avoid the foreclosure process. I suspect that those borrowers who are past due AND meet the eligibility of FHASecure will be offered an opportunity from their current mortgage servicer with little transactional fees. Think about it, if you have a loan in default and this can bail it out why would you care about fee income at that point? So the consumer's best option is probably with their current lender. When you apply that approach to the estimated 250,000 impacted households that's not very many loans to specifically market for business.

Just my .02

SEP

2007

Ken--I agree with you but I actually got one of these yesterday. See my post at FHASecure Diary Part I - I Took My First Loan App For an FHASecure Loan - Let's Be "Guinea Pigs" Together Saving Alfredo's Home .

If the servicer doesn't contact them, they are going to seek us out. I also think this will be a home run for the retail guys at the larger banks that do their own servicing, ie Countrywide, Wells, B of A, etc.

SEP

2007

Great information Aaron. What is your prediction for the new loan limits for California? I love the program and the speed it was implemented. I am afraid that the Bay Area and LA, Orange and San Diego counties will be out of luck even with the rate increase.

Artur--- I think you are going to see FHA go to $417,000 in CA, which may only provide marginal help. But I think you may eventually see Fannie and Freddie go higher to meet the demands of high-cost states like CA. Some are predicting $625,000 like the conforming limits in Hawaii, Alaska, Guam, and US Virgin Islands.

Thank you Aaron for your prompt reply. At least something to work with, but definitely not a solution to problrms here.

FEB

there i am in need of some kind of help on what to do i have a hard $ company it was a 2 year fixed rate and now its adjusting and the rate is up there i want to get a whole new company to finance my home if possible if not i need some back bone to help me with this mortgagage company to work with me on a soultion saxon is a debpt colector they are who i talk to but i dont know is the note holder my rate is 10.25% and payment is now $1,731.08 after doing a budjet check what is affortable for me to keep m home is $1,200.00 is the max give or takeif someone can give me some advise or help e-mail me thank you irene

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