FHASecure

WHAT IS FHASecure

FHASecure is a refinancing option that gives homeowners with non-FHA adjustable rate mortgages (ARMs), current or delinquent and regardless of reset status, the ability to refinance into a FHA-insured mortgage. With FHASecure, the lender will not automatically disqualify you because you are delinquent on your loan, and the lender may offer you a second mortgage to make up the difference between the value of your property and what you owe.

WHO IS ELIGIBLE

So long as you are current on your mortgage and have sufficient income to make the mortgage payment, you are eligible for an FHASecure refinance. If you are delinquent, the default must have been due to the payment shock of an interest rate reset or, in the case of an Option ARM, the "recasting" of the mortgage to fully amortizing. By refinancing into a FHA-insured mortgage, you can expect to pay lower monthly mortgage payments. FHASecure can improve the quality of life for many communities by helping to reduce the number of mortgage defaults and bringing greater stability to local housing markets.

News About FHASecure

The Bush Administration today announced that a federal agency can refinance more subprime loans facing foreclosure, in a move that appears aimed at heading off a Democratic push for a broader housing rescue.

Bush is expanding the Federal Housing Administration’s FHASecure program announced last year to refinance borrowers who became late on payments after a low teaser rate ended. FHA will be able to refinance mortgages after lenders voluntarily reduce the principal owed to a maximum loan-to-value of either 90% or 97% of the home’s current value.

The plan should help an additional 100,000 borrowers, bringing the total refinanced mortgages to 500,000 by year end, reports the Wall Street Journal.

Unlike Democratic proposals to use taxpayer funds to refinance delinquent mortgages on more favorable terms, the Bush plan calls for lenders to take losses and borrowers to pay insurance premiums to FHA.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, opened a hearing today on a broader plan. In an Associated Press article, he said the timing of the Bush administration’s proposal was a “remarkable coincidence.”

Here’s more from the FHA release

In August 2007, FHA modified its refinancing program to help credit-worthy homeowners who missed payments after their teaser rates reset. Now, FHASecure is expanding its eligibility standards. Homeowners who believe they meet this additional eligibility criteria must fall into one of the following categories:

1. Borrowers with adjustable rate mortgages who were late on two consecutive monthly mortgage payments or at two different times over the previous twelve months. FHA will require a 97 percent loan-to-value (LTV) ratio for these borrowers to refinance, the same LTV as FHA’s current standard.

2. Borrowers with adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past 12 months. FHA will require a 90 percent LTV ratio for these borrowers to refinance.

With these new criteria, the expanded FHASecure can help additional borrowers access a more viable refinancing option and will offer lenders an alternative to foreclosing on these individuals. Lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers’ circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to “fill the gap” between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.