FHA Unveils Short Refinance Program for Underwater Mortgages
An Obama Bailout Aimed at Negative Equity Borrowers
Lenders who agree to participate in the program, which is not compulsory, will be obligated to reduce the principal of the homeowner's first mortgage by 10% of the unpaid balance.
The FHA short refinance is a unique program that has the potential to help a lot of struggling homeowners. Of course, in order to refinance, underwater homeowners must meet the following criteria:
- Homeowners must be current on their existing mortgage payment,
- Homeowner must occupy the home as the primary residence,
- Homeowner must fully document income,
- Homeowner must have a FICO score of at least 500, AND
- Existing lenders/investors must agree to the 10% principal reduction.
The resultant FHA loan may not have a balance greater than 97.75 percent of the appraised value of the home. The total loan-to-value (including any second mortgages) cannot exceed 115 percent after the refinancing.
It is worth noting that borrowers who participate in the FHA Short Refinance program may see a reduction in their credit score, as they would with any loan forgiveness. The program is being funded by up to $14 billion in TARP funds.
For more information on the FHA Short Refi Program, visit www.hud.gov.
Published by Kimberly Louise
Kimberly has lived and worked in both the United States and Europe. She holds a BS in Business Administration and a Master's in Political Science. She is also a certified paralegal. Currently, Kimberly is... View profile
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3 Comments
Post a CommentCraigs point echos what I think so many of us are feeling, the nanny state has got to stop. Stealing from one segment of society to pay for another is criminal. The St. Louis MO Mortage market doesn't benefit from bailing out other parts of the country. The best choice is to scale everything back and let poor derisions have the inevitable impact.
This is incredible. I held on to an "underwater house" in the early 90's for 10+ years until I could finally sell it for what I paid for it. What ever happen to taking responsibility for your decisions? Why do I/future generations have to pay for someone else’s risky investment? Unbelievable..
Principal Reduction Program is either a
Mortgage Note Purchase or a
Short Pay Refinance
The best chance a Homeowner has to accomplish a Principal Reduction is to work with a company who can not only get control of your note, but also have a conventional lender that is willing and able to create a new loan.
This is a 3 step process and requires 3-4 parties to complete.
Step 1 Pre-qualification. Free no obligation consultation to gather information in order to do our Quick Qualification.
Step 2 Short Refinance Processing Gather required documents and verification of income along with review of current debt to income.
Step 3 Negotiation. Negotiate with the Bank until a short payoff is accepted, where as the lender would accept a cash settlement short of the full amount owed.
Final Property Appraisal
New Loan origination
Home Owner acceptance
Final Loan documents signed
If any homeowner wants to consider this option and keep their home, get a principal reduction back to todays market v