FHA launches short refi opportunity

Real Estate Broker/Owner with Igoe Realty P.A.

In an effort to help responsible homeowners who owe more on

their mortgage than the value of their property, the U.S. Department

of Housing and Urban Development (HUD) provided new

details about a refinance program it announced earlier this year

that helps responsible homeowners who owe more on their mortgage

than the value of their property. Starting Sept. 7, 2010, the

Federal Housing Administration (FHA) will offer certain "underwater"

non-FHA borrowers a new FHA-insured mortgage. To

qualify, an owner must be current on his existing mortgage, and

his lender must agree to write off at least 10 percent of the unpaid

principal on the first mortgage.

"We're throwing a lifeline out to those families ... experiencing

financial hardships because property values in their community

have declined," says FHA Commissioner David H. Stevens. "This

is another tool to help overcome the negative equity problem

facing many responsible homeowners who are looking to refinance

into a safer, more secure mortgage product."

Other details: A homeowner's existing loan cannot be FHA insured,

and the refinanced FHA-insured first mortgage must have

a loan-to-value ratio no more than 97.75 percent. The owner

must qualify for a new loan under standard FHA underwriting

requirements and have a credit score equal of 500 or higher. The

property must be the homeowner's primary residence, and the new

debt must bring the borrower's combined loan-to-value ratio to

no greater than 115 percent.

Interested homeowners should contact their lenders to find out

if they're eligible, and to determine whether the lender will write

down a portion of the unpaid principal. If a homeowner qualifies,

the U.S. Department of Treasury will provide incentives to existing

second lien holders who agree to full or partial extinguishment

of the liens. To be eligible, servicers must execute a Servicer

Participation Agreement (SPA) with Fannie Mae, in its capacity as

financial agent for the United States, on or before Oct. 3, 2010.

The FHA provided complete details in a six-page mortgagee

letter that can be downloaded in PDF format. To read the letter,

go to: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/


Source: Florida REALTORS®

Comments (1)

Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Hi Jeanette,

The problem with this is that no lender or investor is taking the new loans.  Why?  Because no one wants to take the risk of having a 500 credit score borrower and FHA is forcing that as the minimum.  Hmmm, another thing that is "supposed" to help us and wont?  See my blog about this yesterday...thanks!

Sep 01, 2010 12:36 AM