New Refinancing Opportunities For Homeowners
I just read a great article by AOL contributor, Lita Epstein on the new refinancing opportunities for homeowners who are currently in negative equity in their house. I did some research and this news is very good!
A letter put out by the U.S. Department of Housing and Urban Development (HUD) on August 6, 2010 states that they are making enhancements to the Making Home Affordable Program (MHA) and the Federal Housing Administration (FHA) refinance program that "will give a greater number of responsible borrowers an opportunity to remain in their homes."
Essentially, these changes will allow qualified borrowers who are current with their mortgage company the opportunity to refinance into a more affordable FHA loan provided that the lender or investor writes off the unpaid balance of the original first lien mortgage by 10%.
Below are the Guidelines for Elibility set forth by the Department of Housing and Urban Development:
- The homeowner must be in a negative equity position;
- The homeowner must be current on the mortgage to be refinanced;
- The homeowner must occupy the subject property (1-4 units) as your primary residence;
- The homeowner must qualify for the new loan under standard FHA underwriting and your FICO score must be greater than or equal to 500;
- The existing loan must not be a FHA-insured loan;
- The existing first lien holder must write off at least 10 percent of the unpaid principal balance;
- The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;
- Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have combined loan-to-value ratio greater than 115 percent;
- For loans that receive a "refer" risk calculations from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowners total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;
- FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;
- FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance
- the existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification.
The FHA encourages borrowers that if they have any questions regarding eligibility requirements to contact the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342).
This federal program can positively help millions of American homeowners nationwide and I encourage you to look into it if you are in a negative equity situation!
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