FHA Underwater Refinance Program is Here

By
Real Estate Mortgage Broker with Fairway Independent Mortgage Corporation NMLS #395819

As part of the government's Making Home Affordable Refinance program, a new program has been released that is aimed toward helping millions of underwater home owners refinance their mortgage and stay in their homes.

The plan, set to be launched on September 7, will allow non-FHA borrowers to refinance into an FHA mortgage at 97.75% of their home's appraised value, with the mortgage balance being written down, or forgiven, to bring the balance down to that ratio. 

However, there is one aspect of the program that is problematic, and may make it difficult for many people to qualify.  The plan requires the home owner's current mortgage lien holder to write down the mortgage by at least 10%.  The success of the plan depends on the willingness of mortgage banks to write down their debt.  Undoubtedly, there will be incentives for banks to do so, but that doesn't mean that they all will participate, or that even any will participate.

Regardless, this plan is a ray of hope for millions of responsible home owners who are underwater and have refused to allow their homes to go into foreclosure or short sale. 

The FHA Underwater Refinance program will require that the home owner is current on his or her payments and must meet certain qualifying criteria.  Beyond the requirement of the current mortgage holder to write down the debt, the qualifying factors are not much different than qualifying for a traditional FHA Mortgage, so many people, especially those with a stable job and decent credit, should qualify.

For more on this program, here is the full FHA Mortgagee Letter 2010-23.

 

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Lakewood, CO 80228

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  1. Prathap Rajamani 08/24/2010 02:41 AM
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Rainmaker
237,773
RJ Baxter
303-670-0137
Fairway Independent Mortgage Corporation

Exactly....sigh.  I blogged about this on Saturday too.  IF the banks are going to write down their mortgage debt, someone will have to pay for it, and that someone is the government.  Another Obama Bailout Rumored for August

August 10, 2010 07:41 AM
Ambassador
2,277,479
Lenn Harley
Real Estate Broker - Virginia & Maryland
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

RJ.  Can't be done.  There's no money left.  The government gave it all to The Wall Street Gangs and banks already.

August 10, 2010 08:01 AM
Rainer
124,584
Mark Robinson
America's First Funding Group

I'm with Lenn.

If a bank has a client who is paying on time why would they write down the debt? Highly unlikely.

As with all the other programs that are being (or have been) announced, you need a willing lender to participate. We've had a bunch of failures already due to lack of participation.

The spirit may be willing but the profits are not.

 

August 10, 2010 11:36 AM
Rainmaker
221,615
Phil Stevenson, CRMP
Reverse Mortgage Expert in Miami and Florida
PS Financial Services 786-586-3336 or 888-845-6630

Lenn, RJ, and Mark,

The lender holding the mortgage is given incentives for writing down the debt.  So that is not the issue as it was in the past.  The issue is one that my office is trying to solve:

WHAT LENDER/INVESTORS WILL BUY THESE LOANS IN THE SECONDARY MARKET?  Or what lenders are taking client whose current lenders will reduce the debt?  Every lender/investor we have found will not take it because FHA is making the 500 credit score a mandatory guideline.

Thanks!

September 03, 2010 02:08 PM
Rainer
17,726
Jennifer Uranga
Surprise, Arizona Mortgages, NMLS #325618
Amerifirst Financial Inc.

Phil- You got it. IF they choose to participate which I believe that they will with the overlay of keeping the new FHA loan so that they continue to service the loan after the "forgiveness" there will be no where for these to go. Investors in the market are not going to like this one bit. This starts the roller coaster of people just bailing on what they owe. I understand that a homeowner thinks it is unfair but in reality what does this help someone who is current and in a home they have no intentions of selling? If they borrower is staying there and refinances the home and continues to pay on that home for who knows how long after that then they may as well not bother. By the time they make their money back on the refinance into an FHA they may be a break even in the market and could just sell the house and get the same one cheaper down the street.

I also love how this is going to be rolled out after October when the loan limits for FHA are going to come crashing down. This is where people will get screwed in a lot of markets.

June 16, 2011 12:52 AM
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