Magazine article Mortgage Banking

FHA Launches Short Refi Program for Underwater Borrowers

Magazine article Mortgage Banking

FHA Launches Short Refi Program for Underwater Borrowers

Article excerpt

On Aug. 6, the Federal Housing Administration (FHA) published guidance on a new refinance program for underwater non-FHA borrowers who are current on their loans and whose lenders agree to write off at least 10 percent of unpaid principal. The details were provided in a mortgagee letter and the new program will be effective starting Sept. 7.

The program was initially announced in March by the administration and is being referred to as the FHA Short Refinance option. To qualify for the new FHA loan, borrowers must owe more on their mortgage than their home is currently worth, must qualify under standard FHA underwriting requirements and have a credit score equal to or greater than 500.

In a press release announcing the details, FHA Commissioner David Stevens is quoted saying, "We're throwing a lifeline out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined." Stevens added, "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. …

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