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Tuesday, September 7, 2010

Stage set for FHA Short Refinancing program starting today

I didn't even know this program existed.  Here are some of the conditions of the program:

Under the program, eligible borrowers can receive an FHA-insured loan if the lender or investor writes off the unpaid principal balance of the original first-lien by at least 10%.

To be eligible for the new loan, the homeowner must be underwater but still current on the mortgage, which cannot be already insured by the FHA. A credit score of 500 or better is required. The new refinanced loan must have a loan-to-value ratio of no more than 97.75%.

After receiving the new refinancing through the program, the borrower's combined loan-to-value ratio on the re-subordinated mortgages cannot exceed 115%. The new FHA mortgage can only be used to refinance the unpaid principal balance on the first lien.
Negative Equity continues to be a problem and this program will not address this issue.  Other government programs like HAMP haven't work in the past and I believe we can expect similar results.

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