Department of Housing and Urban Development (HUD) announced enhancements to the existing Making Home Affordable Program (MHA) and Federal Housing Administration (FHA) refinance program that will give a greater number of responsible borrowers an opportunity to remain in their homes. These enhancements are designed to maintain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan.

This opportunity allows borrowers who are current on their mortgage to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10%. And that’s where we have seen other government programs failing miserably in the past.

Eligibility requirements for this program:

Participation is voluntary and requires the consent of lien holders.

  1. The homeowner must be in a negative equity position;
  2. The homeowner must be current on the existing mortgage to be refinanced;
  3. The homeowner must occupy the subject property (1-4 units) as their primary residence;
  4. The homeowner must qualify for the new loan under standard FHA underwriting requirements.
  5. The existing loan to be refinanced must not be a FHA-insured loan;
  6. The existing first lien holder must write off at least 10 percent of the unpaid principal balance;
  7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;
  8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;

The program is for loans whose case numbers are issued on September 7th, 2010 and closed by December 31st, 2012. (** Note that as on October 20th, 2010 no lender has decided to participate in this program. We will keep you updated when we know of any lender deciding to participate.**)

Read the full FHA Mortgagee Letter.

If you are struggling with your mortgage payments and would like to explore different options available to you, contact me at 408.615.0655 or email me at Shashank@ArcusLending.com.