Many people are asking about this type of program since alot of lenders they talked to don't offer it or have no clue on the program.
What is the program?
The new FHA Secure loan program is a new refinance option that is being offered through the FHA to home owners that have fallen behind on their mortgage payments due to increasing interest rates and payments on their adjustable rate mortgages. The FHA Secure loan program is the Bush administrations initiative to slow the record foreclosure rate in America.
The FHA Secure loan program is designed to help home owners who took out subprime adjustable rate mortgages and other borrowers facing foreclosure due to an adjustable rate mortgage. Many home owners are finding the new increased mortgage payments difficult or impossible to pay every month and many home owners are now sliding towards foreclosure. The FHA secure program would allow these home owners to refinance their adjustable rate mortgage into a more stable fixed rate mortgage and include up to 6 months past due mortgage payments into the loan balance. However the home owners must prove that the payment increase from the adjustable rate mortgage was the cause of their delinquent mortgage payments and not lack of financial responsibility. FHA will also permit back taxes and insurance to be included into the new loan amount. No cash out refinances are allowed with FHA secure.
Guidelines
Basic overview below
- The interest rate on your home loan must have been or be set to adjust between June of 2005 to December of 2009. Presently, loans taken out by borrowers today will not qualify for this program in the future.
- The property must be owner occupied and you must have at least 3% in equity in your home or three percent in cash.
- You must have sufficient income to make your new FHA mortgage payment as defined by traditional allowable FHA loan qualifying Ratios.
- You must have a stable and sustained history of employment for the last two years
- Your credit history must reflect prior on-time mortgage payments, before your mortgage rate began adjusting.
Are interest-only non-FHA insured loans eligible for FHA Secure?
So long as the borrower is current on the mortgage payments, any type of conventional loan may be refinanced with FHA Secure. However, if a borrower is delinquent, that delinquency must be the result of the payment shock of an interest rate reset or, in the case of an Option ARM, recasting of the mortgage to fully amortizing.
Is there a maximum number of months of delinquent payments that a lender can roll into the new mortgage?
No. Homeowners with sufficient equity in their property may include the entire delinquency into the first mortgage as long as doing so does not result in exceeding the maximum FHA loan-to-value ratios and the loan limits for the area.
Can FHA assist borrowers who are current on their mortgage but facing an ARM reset?
Yes. FHASecure is available to all borrowers with non-FHA ARMs, current or delinquent and regardless of reset status. Lenders are permitted to offer a second mortgage to those borrowers who are current but owe more than what their property is worth. This authority for secondary financing is only applicable for borrowers who are delinquent or current on their existing mortgages.
Where can I find the additional guidance on FHASecure?
Guidance was published in Mortgagee Letter 2007-11, which can be found on FHA's website www.fha.gov or www.hud.gov/offices/hsg/mltrmenu.cfm. The Mortgagee Letter permits consideration of delinquent borrowers and secondary financing by the lender. FHA has not changed its other underwriting policies and borrowers must still meet standard FHA underwriting criteria.
Hopefully this helps any confusion!
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