FHA Short Refinance
FHA continues to be active with tightening FHA loan guidelines for many of their loan products, but the FHA short-refinance is very aggressive mortgage relief for a targeted group of troubled borrowers. The U.S. Department of Housing and Urban Development announced the new FHA loan program because almost 25% of financed homes above 100% loan-to-value. We have been hearing about this government initiative to help borrowers who property values had declined below their mortgage balance. Foreclosures continued to rise and HUD felt like this was the time to roll out the FHA Short Refi Program. This is unlike the other FHA refinance loan programs that limit borrowers to 96.5% loan-to-value and the FHA short refinance goes above and beyond the value of the home.
FHA Short Refi Focuses on Helping Underwater Mortgages
HUD will release the Federal Housing Administration’s new Short Refinance program, which is designed to help facilitate mortgage refinancing by borrowers who are underwater, meaning they owe more on their mortgage than the home is worth. HUD Secretary Shaun Donovan told a group of black real estate professionals Tuesday in Fort Worth that while the Obama administration has made strides in ensuring affordable housing for all, there’s still room to improve. “There’s no question that the state of today’s housing market is in significantly better shape than anyone predicted a year ago,” Donovan said.
Many borrowers find their homes underwater and with the forecast for continued high unemployment, the housing recovery remain the biggest threats to a double dip recession. At the end of last year, among all U.S. households that had a mortgage on their property, 11.3 million, or 2 %, were underwater, he said. Those depreciated properties are mostly in California, Arizona, Florida, Michigan and Nevada.
Most FHA lenders believe that the FHA short-refi is a unique approach and that this mortgage relief initiative will help out a lot of struggling homeowners, but unfortunately not everyone will qualify and meet the FHA loan requirements.
