FHA Short Refinance Has New Guidelines

August 16th, 2010

Upside-down on your mortgage? Frustrated you are unable to refinance to the historically low mortgage rates currently available? Unwilling to sell your home and go through a short sale? FHA has previously allowed a “short refinance” to eligible borrowers. Recently new guidelines have been published detailing who is eligible for the FHA Short-Refi program. Use one or more of the free mortgage calculators to determine your eligibility and savings if you are eligible and qualified for this program.

Purpose of the program

For over a year Washington has been putting forth programs and adjusting them to assist homeowners who are upside-down on their mortgages, meaning they owe more in mortgage balances than their homes are worth. These various programs have met with varying degrees of success, from the highly successful Making Home Affordable refinance programs through Fannie Mae and Freddie Mac to the much less successful loan modification programs through the Home Affordable Modification Program, or HAMP.

Continuing the philosophy of tweaking existing mortgage underwriting guidelines within existing mortgage products and programs, the Department of Housing and Urban Development and the Department of the Treasury have rewritten some of HUD’s FHA guidelines to facilitate refinancing upside-down homeowners. HUD estimates the program could help 500,000 to 1,500,000 borrowers restructure their current mortgage debt.

Are you eligible?

There are several criteria you must meet to be eligible for the FHA Short-Refi program. Note you must meet all of the following criteria:

Current mortgage company holds key

Before checking on whether you meet all the eligibility criteria, it is important to know that your existing lender must be willing to participate in this program for it to be successful. The key component of the FHA Short-Refi program is that your existing primary mortgage holder must write off at least 10 percent of the current unpaid mortgage balance. If you owe $200,000 on your mortgage, your existing lender must be willing to take a principal pay-off of $180,000 or less.

If using a refinance calculator you determine this program can be very beneficial to you, contact your existing lender and determine if they are participating and what steps you must take with them to successfully complete the transaction.

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