Howard Sobel posted recently on the FHA program to refinance people who have negative equity. I think the idea is brilliant, and opens up possibilities other than a short sale for people who are underwater and want to keep their home. I'm sure there is small print, but if it helps 3-4 million people in the next 2 years, that should make a huge difference.
The guidelines strike me as very reasonable as presented. Time to Google the program and get more information. I seldom re blog, but this is an important development.
FHA Offers Short Refi Program For Underwater Homeowners In an effort to help responsible homeowners who owe more on their mortgage than the value of their property HUD adjusted its refinance program. The changes will enable lenders to provide additional refinancing options to underwater homeowners. see chart
Starting September 7, 2010, FHA will offer some underwater non FHA borrowers the opportunity to qualify for a new FHA insured mortgage. Designed to meet its goal of stabilizing housing markets, by helping 3 to 4 million homeowners through 2012.
FHA provided some guidance
Participation in FHA's refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan:
1. The homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage.
2. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500.
3 The property must be the homeowner's primary residence.
4. And 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%.
5.The existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent.