FHA Announces Adjustable Rate Mortgages

Adjustable Rate Mortgages: FHA to the Rescue! FHA has just announced their initiative that will allow homeowners with various types of adjustable rate mortgages (ARMs) to refinance into FHA products. While this is not a complete bail out of the problem it will help those whose payments got out of reach when their ARM adjusted recently. The initiative is designed to extend eligibility to borrowers who became delinquent because of the reset of their interest rate.

The initiative which is called FHASecure is a temporary program designed to provide financing opportunities to homeowners and to increase the liquidity in the mortgage market. All loan applications under this initiative must be dated prior to December 31, 2008. Since many lenders have made efforts to keep borrowers in their homes, FHA is looking to provide help to those who have gone delinquent in the last 6 months. It is truly designed to help those who were hurt by the reset and not by ever increasing outside financial responsibilities.

The credit guidelines have been set and allow for review by human underwriters and not just automated submissions. Below are listed the highlights for eligibility:

The loan must have been a non-FHA ARM loan that has reset.

The loan history must show no delinquent activity the 6 months prior to the reset of the interest rate.

As long as there is sufficient equity FHA will allow delinquent or missed payments to be included in the refinance.

It must be determined that the cause for the delinquency was the reset and that once the loan is refinanced the borrowers will have sufficient income to maintain the payments.

The new loans under FHASecure can not exceed FHA limits for a geographic region. If the missed payments exceed the total of the FHA limits, the old lender may execute a second mortgage. If a payment is required on this second mortgage it must be included when qualifying the borrower.

This will be seen as a great step in helping to reduce the amount of foreclosures in many areas. However it must be noted that many ARM type loans were used to qualify families for homes that were out of their price range without the lower rates inherent to ARMs. So this imitative may not actually be as helpful as possible. For more information or to see if you can qualify for this assistance please call your local FHA lender.