In a few days, the government will be launch the latest mortgage relief effort with the FHA short refinance program targeting homeowners who are struggling with an underwater mortgage. The FHA short refinance program has also been called the Emergency Homeowner Loan Program.  The only catch for eligible homeowners is that they must have a stellar record of timely mortgage payments before qualifying for FHA refinancing under this program.  

Take advantage of Refinancing Underwater Mortgages with the FHA Short Refi Program

The FHA Short Refinance loan was created to assist distressed but responsible homeowners who owe more on their home loan than their house is worth because their local markets saw significant declines in property values. The FHA short refinance program will kick off on September 7th. FHA rates remain at record lows, so this should be a very popular loan program as approximately 35% of homeowners in the U.S. are said to have an underwater mortgage.

FHA will offer this mortgage relief opportunity to specific non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least 10 % of the unpaid balance of the first mortgage. The new mortgages would then be FHA-insured.  The borrower must have a credit score of at least 500 and the house must be the homeowner’s primary residence.

To be eligible for FHA’s Short Refinance program, a homeowner must meet the following criteria:

• Borrower must have a mortgage underwater (negative equity as mortgage is greater than property value)

• Homeowners must be current on their mortgage

• Borrower must live in their home (primary residence)

• Borrower must have a minimum 500 credit score

• Homeowner must have an existing non-FHA loan

• Existing mortgage lender must write down at least 10% of the unpaid balance

• Refinance the new FHA mortgage to a loan-to-value ratio of no more than 97.75 %.

In addition, the first mortgage being refinanced must have a maximum loan-to-value of 97.75 %.  Some FHA lenders are exciting with the government’s aggressive approach to help homeowners find a solution for refinancing underwater mortgage loans. Banks are more willing to negotiate with borrowers who delinquent on their first or second mortgage.  Many FHA lenders will not consider writing down loan balances or extending loan modifications unless homeowner can demonstrate that they can afford their home.  FHA Commissioner David Stevens said the government is “throwing a lifeline” to families, giving homeowners and lenders another tool to battle the problem of negative equity facing borrowers current on their mortgage.

The Federal Housing Administration has been steadfast with regards to FHA mortgage assistance and foreclosure prevention programs.  For the last few years, the one loan program that struggling homeowners could turn to was the FHA home loan. With the approval of Congress, both the Bush and Obama Administration have extended financial aid in the form of FHA mortgage relief. 

HUD, Fannie Mae and Freddie Mac have come together to create targeted loan relief to borrowers who financial hardships, like a loss of home equity, employment issues and even bad credit.  FHA loan requirements have tightened somewhat in the last few years, but there are still significant opportunities for homeowners to receive financial assistance with FHA home refinancing.  FHA confirmed a new program, the FHA short refinance and it will go live on September 7^th.  This refinance program will actually enable homeowners who are underwater to refinance into a lower mortgage balance. To qualify, homeowners must be current on a non-FHA loan to refinance into an FHA mortgage when their lender agrees to write off at least 10% of their principal.

US Government Continues to Fund FHA Mortgage Relief Programs Listed below are the unique conventional and FHA loan programs created to provide mortgage relief:
	FHA Secure Hope for Homeowners Home Affordable Refinance Program Home Affordable Modification Program Second Mortgage Modification Program FHA Short Refinance

US Government Continues to Fund FHA Mortgage Relief Programs

Today FHA mortgage rates have fallen to record levels.  Qualified borrowers can lock a 30-year fixed loan with a rate of 4.125% and the 15-year loan features a rate 3.875%. Don’t miss out on these once in a lifetime home financing opportunities.

FHA home financing has played a crucial role in helping Americans become homeowners and they have been offering mortgage products since the Great Depression.  Today, FHA home loan programs support almost 35% of the home financing market. FHA is the home financing arm of the Housing and Urban Development Department. It oversees Fannie, Freddie, FHLB and other mortgage lenders and provides mortgage insurance on loans made by the FHA lenders for lower-income and first-time buyers.

Is FHA Home Financing Getting Better?

FHA now insures about 5.4 million 1-family mortgage loans at a combined value of $675 billion, making it the world’s largest insurer of mortgage loans.  HUD continues to offer FHA refinance and purchase loans in all 50 states.

Together with Fannie and Freddie, the FHA backs 90% of new American home loans. FHA mortgage programs have received a lot of criticism recently, because of the depleted FHA loan reserves and increased foreclosures but the agency was the only financing company that stepped up to fill the void when the subprime mortgage market crashed in 2006.  FHA again stepped up in 2008 when conventional mortgage lenders and private insurers were squeezed by the credit crunch.  FHA lenders remained focuse on improving the housing markets by providing better FHA home loans in 2011.

First time homebuyers like FHA loan programs because the down-payment requirements are low, the lending fees are low and of course it doesn’t hurt that FHA rates are the lowest they have been in 50-years.  With record low FHA loan rates and home prices dropping, you would think that home buying would be exploding, yet the FHA home loan application volumes have been flat since the tax credit for first time homebuyers expired on April 30^th.  Needless to say there are still thousands of borrowers that have taken advantage of FHA refinancing and FHA lenders anticipate that thousands more will utilize FHA mortgage products this year while low interest rates are available.  FHA guidelines for refinance loans have already made significant changes in the last few years. 

HUD announced that The Federal Housing Administration plans to hike the annual fees it charges new borrowers starting September 7th, which would add about $300 million a month to the agency’s eroding cash reserves.  The insurance premiums are capped at 0.55 % of the value of a loan. Earlier this week, the Senate voted to raise the cap to 1.5 %. President Obama is expected to sign the measure this month.  But the FHA does not plan to raise the fees to the maximum level allowed, and it estimates that borrowers would pay about $38 more on average each month, agency officials said. The increase would not apply to current FHA loan holders. HUD said that raising the FHA lending fees will give the agency a much needed cash injection.  The fee structure revision only aligns its fee structure with that of private mortgage insurers, which were crowded out of the market as the popularity of FHA loan program increased.

Increasing the premiums is a quick way for the agency to elevate its loan reserves that have been dwindling down from the foreclosures and loan defaults. In the past, FHA has avoided raising loan fees because they feared that they were closing the door of opportunity for qualified borrowers.  In addition, many economists had warned that drastic changes to home financing would likely hinder recovery of the housing sector nationally. FHA already increased the upfront fees it charges borrowers earlier this year. Those FHA mortgage lending fees helped keep the agency cash-positive this fiscal year, with a net cash flow of $446 million as of June 30th.  

FHA Commissioner David H. Stevens said, “The premium is another important measure to help protect the FHA mortgage program.”  FHA asked Congress for authority to increase the annual fees.  The loan fee increase was included in a broad FHA loan reform bill that passed the House in June. But when the Senate did not act on it, the FHA pushed for a free-standing bill that would allow for passage of the premium increase before Congress began its August recess.

Once again this week, FHA loan rates fall to record levels.  Qualified borrowers can qualify for a 30-year fixed rate at 4.25%. Yet, HUD is considering even more changes to FHA guidelines for purchase mortgages and FHA refinance options. HUD has been talking about implementing a minimum credit score requirement of 500 for FHA mortgage loans.  In regards to FHA purchase loans, borrowers with credit scores below 580 would be required to make a down-payment of at least 10% rather than the 3.5%.  Many FHA lenders have already taken steps like these with minimum credit scores and higher down-payments.  In regards to FHA refinancing, many lenders have been requesting more home equity in situations when the borrower’s credit is in question.  FHA credit has always been paramount to FHA lending.

Will a Minimum Credit Score Requirement Hinder the Ability for Americans to Refinance with an FHA Mortgage?

Over the years, FHA credit has been a great alternative to subprime lending because FHA would consider borrowers with low credit scores if they had compensating factors.  These types of FHA loans were manually underwritten and in most cases would be required to have cash reserves equal to at least one monthly mortgage payment.  Rumor has it that HUD is considering reducing the ability for FHA refinance opportunities if the mortgage balance is greater than the home values.

HUD is set to roll out a few new policies that could significantly affect the way some FHA lenders originate mortgages nationally.  FHA invited public comment on several of these policy changes in an effort to bolster FHA loan reserves.   According to FHA Commissioner David Stevens, “Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important ” to FHA’s success.

There has been a lot of talk about FHA home loan programs in recent months.  It has been no secret that HUD has tightened FHA guidelines in an effort to stem foreclosures and FHA loan defaults nationwide.  The Federal Housing Administration already tightened the FHA streamline program so FHA customers can no longer finance closing cost with the streamline refinance loan.  Many of the FHA borrowers with good credit have been able to find FHA lenders offering no cost FHA streamline refinance offers.  This is the situation in which lenders are paying streamline closing costs in an effort to win the borrower’s business.  In most cases no cost streamline loans are approved for borrowers that have a high credit scores and low debt to income ratios.

With FHA rates still be recorded at all-time lows it’s hard to understand why low fixed mortgage payments are not enough of a motivation for first time homebuyers.  Yet sluggish reports continue to be reported weekly with low FHA purchase loan activity. The housing sector continues to wait to see if the home buying market can rebound since the expiration of the first-time homebuyer tax credit.  The FHA has remained aggressive with the FHA loan guidelines as borrowers still only need to come up with 3.5% of the down-payment.

The FHA has promised to lower allowable seller concessions (the percentage sellers can take from the sales price of a home to fund closing costs).  FHA will reduce seller concessions from 6% to 3%. According to an announcement in January, the current level of 6% exposes the FHA to excess risk by creating incentives for appraisers to increase the value of these homes. The change will take place in “early summer,” according to the FHA, but a spokesperson said no specific date has been set.  The FHA closing costs include fees for origination, attorneys, appraisal and inspections, title search, title insurance, credit reports, and more. FHA down payment assistance is not included as a closing cost.

FHA refinance activity rose once again this last month as homeowners continue to make efforts to lower their FHA rates and monthly payments.  Homeowners like FHA refinance programs because the rates are low as the agency promotes fair lending and affordability. In a tough economy, many borrowers don’t qualify for a FHA streamline because they can’t afford to pay for closing costs and lender fees.  Consider a no cost FHA streamline that is available to qualified borrowers who have not been late on their FHA loan in the last 12 months.

Fixed FHA Rates starting at 4%

To figure out the average interest rate, we consider the FHA mortgage rates on Monday through Wednesday of each week from FHA lenders around the country. FHA rates often fluctuate significantly, even within a given day. FHA rates on five-year adjustable-rate mortgages averaged 3.76 %, down from 3.79 % a week earlier. Rates on one-year adjustable-rate home loans dropped to an average of 3.64 % from 3.70 %. The FHA mortgage rates do not include add-on fees known as points.

FHA Cash Refinancing FHA Streamline Refinance FHA for Home Improvements

Take advantage of FHA’s flexible credit guidelines and streamline loan process and get approved for an FHA refinance today.  As an approved FHA lender, we have the volume to justify the lowest FHA rates online.