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
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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.
