In the last two years, FHA introduced several loan modification plans and mortgage relief programs, like FHASecure and Hope for Homeowners and today they announced a third attempt with a new FHA loan modification program.  These past FHA home loan modification performed well because they never really got off the ground with the participating FHA mortgage lenders.  At press time, FHA mortgage rates remained at record low levels.

Most of you will remember how FHASecure was pushed out by the Bush Administration in an effort to salvage homeowners stuck in an ARM that was about to reset to a higher interest rate.  This FHA loan program was intended to enable delinquent borrowers a mortgage refinancing option with low fixed FHA rates. FHA Loan Pros discussed it in a recent article; HUD claims that “FHASecure has helped more than 100,000 borrowers remain in their property, but the reality was only 3,800 delinquent homeowners received specific aid from the FHASecure program in 2008.

Then late last year, FHA announced the lending savior, Hope for Homeowners that was designed to do what FHASecure was not able to accomplish.  The press ate it up and FHA was the home financing talk on airwaves for months. Unfortunately as of June 30th for the Hope for Homeowners program could account for 949 mortgage applications but only 1 Hope for Homeowner loan could be documented.   FHA remains determined to extend a loan modification to distressed homeowners, so hopefully this new FHA initiative will succeed.

The New FHA Loan Modification Program

o    FHA announced their new mortgage relief program to help distressed FHA borrowers.

o    The FHA home loan is refinanced and 30% of the FHA mortgage is placed into an interest-free second mortgage that must be paid back when the home is sold or refinanced.

o    Borrowers can qualify with ratios of 31/55. The first ratio says that up to 31% of the individual’s monthly income can be used for housing costs and that 55% can be used for housing costs plus other monthly debts.

o    The homeowners must be able to document a hardship (ie. an income change, loss of employment etc.) and it must be deemed as a long term hardship.