Tuesday, September 14, 2010

FHA Short Refinance program

The FHA has announced a new program in the ongoing battle to fix the foreclosure crisis.  See details on the FHA website for this FHA Short Finance program for underwater homes.

The main points of the new program -

  • Existing loan to be refinanced is not FHA insured;

  • Must owe more on their mortgage than the value of the property;

  • Must be current on the existing mortgage to be refinanced;

  • Must have a “FICO based” decision credit score greater than or equal to 500;

  • Existing first lien holder must write off at least 10% of the unpaid principal balance (UPB);

  • Loan-to-value (LTV) ratio of no more than 97.75%;

  • Combined loan-to-value (CLTV) ratio must be 115% or less; and

  • For manually underwritten loans, the qualifying ratios can be no greater than 31/50.

Sadly, there are many Metro Phoenix area homeowners who won’t qualify for this program because they’re more than 15% underwater.

update Sept 15, 2010: just heard about another point in this program. To facilitate refinancing, the Treasury Department will provide incentives to existing second-lien holders who agree to full or partial extinguishment of the liens. That's big news! And for some underwater homeowners, making the second mortgage 'go away' might mean the difference between staying in the home or walking away.