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®