Refinance Your Home | Don't Lose it to Foreclosure
Many homeowners who are in foreclosure are victims of sub-prime adjustable rate loans and are looking to FHA as a source to refinance their properties. Several new FHA programs are available to assist these borrowers in avoiding foreclosure. FHA has also increased its loan limits.
1. Borrowers with adjustable rate mortgages who were late on two consecutive monthly mortgage payments or at two different times over the previous twelve months. FHA will require a 97 percent loan-to-value (LTV) ratio for these borrowers to refinance, the same LTV as FHA's current standard.
2. Borrowers with adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past 12 months. FHA will require a 90 percent LTV ratio for these borrowers to refinance.
Now additional borrowers will have access to more acceptable refinancing options and will offer lenders an alternative to foreclosure on these individuals. It may be in the lenders best interest to voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers' circumstances. FHA is encouraging lenders to make other arrangements, such as subordinate financing, to help cover the difference between existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.
FHA will insure new, more affordable mortgages in exchange for this increase in equity. New loans will continue to meet FHA's underwriting standards. Lenders will be required to ensure borrowers have the capacity to repay their mortgages by showing a reasonable credit history, a stable employment and fully by documenting and verifying their incomes.
FHA refinancing will save money
With all FHA-insured loans, borrowers are required to pay upfront and annual premiums on their loans, which directly contribute to the soundness of FHA's insurance fund and protect taxpayers. FHA will also be simultaneously updating the pricing policy for these premiums. The new policy will base premiums on the individual borrower's credit risk profile. More than 90 percent of FHA-backed loans are 30-year fixed rate mortgages. Homeowners currently using FHA refinancing are saving $400 a month on average compared to their previous sub prime loans.
More homeowners are finding that FHA offers mortgage terms they can afford. The FHA refinancing product offers a sensible way to help more families refinance without putting the government or taxpayers at risk. The changes are designed to help FHA provide additional liquidity and stabilize local real estate markets.
Since September 2007, FHA has helped pump nearly $68 billion of much-needed mortgage activity into the housing market, $28.5 billion of which has helped more than 150,000 homeowners who are current or past due on their loans avoid foreclosure, and, it expects to assist 500,000 families by the end of the year.
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