Wednesday, August 11, 2010

SI Real Estate News | FHA Launches Refi Opportunity to Underwater Homeowners

Real estate mortgage holders in the Tampa Bay area, and across the country, can now seek relief on their mortgage with a new Federal Housing Administration (FHA) refinancing program. According to a press release FHA Launches Short Refi Opportunity for Underwater Homeowners dated August 6, 2010, “Starting Sept. 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers a new FHA-insured mortgage. To qualify, an owner must be current on his existing mortgage, and his lender must agree to write off at least 10 percent of the unpaid principal on the first mortgage.”

This is a drastic effort to help responsible homeowners who, like so many, owe more on their mortgage than their home is worth, which therefore puts them in the so-called “underwater” category. The effort is one of many real estate and financial remedies employed by the U.S. Department of Housing and Urban Development to help bring stabilization to the housing market and the overall economic stability of the country.

FHA Commissioner David H. Stevens stated, “We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined. 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.”

To qualify for this new refinancing program, homeowners must:

• Owe more on their mortgage than their home is worth
• Be current on their existing mortgage
• Must qualify for the new loan under standard FHA underwriting requirements
• Have a credit score equal to or greater than 500
• The property must be the homeowner’s primary residence
• The borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower’s combined loan-to-value ratio to no greater than 115%
• The existing loan must not be an FHA-loan insured
• The refinanced first mortgage must have a loan-to-value of no more than 97.75%

"In order to help facilitate this refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.”

This effort following on the heels of the First-Time Homebuyers Tax Credit and the Move-Up/Repeat Homebuyers Tax Credit is leading the way to the stabilization of the housing market in Tampa, Florida. While not everyone will qualify for this refinancing program, those who do should contact their lenders to find out if they will agree to write down part of the unpaid principal.