FHA Offers Short Refinance Program to Underwater Borrowers
August 12th, 2010
Written by Frost Mortgage
Categories: FHA, Federal Housing Administration
Starting September 7th the Federal Housing Administration (FHA) will offer homeowners who owe more than their home is worth a new refinancing option or “short refinance” opportunity.
Hundreds of thousands of homeowners who are underwater on their mortgages may by having a lower rate and having their principal reduced through the FHA Short Refinance initiative.
Deutsche Bank said that there may be as many as 20 million U.S. underwater homeowners by the end of 2011. Underwater homeowners are at much greater risk of foreclosure, of either the strategic or traditional variety.
“This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product,” FHA Commissioner David Stevens said.
In order to qualify for the FHA short refinance initiative, homeowner must be current on the existing mortgage to be refinanced and owing more on it than the property is worth. Additionally, consumers must meet FHA loan standards and their lender has to agree to write off 10% of their balance, as well as refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent.
The Obama administration implemented numerous programs to help troubled consumers keep their houses that include the popular Home Affordable Modification Program (HAMP), which is designed to assist homeowners through minimizing how much they have to pay on their mortgage.
August 12, 2010 By Jeniffer Winget
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