As an FHA lender, we are happy to become part of the solution for the ARMS that are resetting and are in default.
In a press release issued by the Federal Housing Administration on Friday, the headline read BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES
The contents are highlighted here:
President George W. Bush announced on 8/310/7 that the FHA will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately.
Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing…
This is huge! Imagine, there were no options a week ago and now there is a refinance, that can include defaults and even go above FHA lending limits. Unprecedented!
In many cases homeowners may be permitted to include mortgage payment arrearages into the new loan amount, subject to existing geographical mortgage limits and the loan-to-value limit shown below. Before Friday, only borrowers who were current on their existing loan were allowed to re-finance into an FHA-insured mortgage.
Highlights of the FHASecure Initiative
- The mortgage being refinanced must be a non-FHA ARM that has reset.
- The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments.
- If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.
- Under certain conditions, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2), the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing.
- Lenders must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the new monthly payments under the FHA-insured refinancing mortgage.
Additional Information about the FHASecure Initiative:
What May be Included in the FHASecure Mortgage Amount:
FHA will permit the inclusion of the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges.
FHA will also permit arrearages (principal, interest, taxes and insurance) to be added into the new loan amount. Subordinate Financing under the FHASecure Initiative:
If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgage and any subordinate lien may exceed the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for no less than 36 months to not be considered in the qualifying ratios.
If you have an ARM that has reset and you can’t make the payments, this may be your chance to recover!
We’re licensed in Florida, Georgia, Alabama, South Carolina and Tennessee. Send me an email at traci@tracigregory.com and we will see if this will work for you! You may read the entire press release at: http://www.hud.gov/news/release.cfm?content=pr07-123.cfm.
