[Moe Bedard]

I am getting a lot of readers on this post so I thought I would post more info here on this the FHA Secure Loan.

BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES

FHA to implement new “FHASecure” refinancing product
President George W. Bush today (08/31/07) announced that HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing…

To read the entire press release, please visit: http://www.hud.gov/news/release.cfm?content=pr07-123.cfm

LENDERS PLEASE NOTE: FHA WILL PUBLISH A NEW MORTGAGEE LETTER WITH GUIDANCE ON THE NEW FHASecure PROGRAM ON OR ABOUT TUESDAY SEPTEMBER 4th, 2007 at: http://www.hud.gov/offices/hsg/mltrmenu.cfm

Highlights of the FHA Secure Initiative:

To qualify for the new program, being called FHA Secure, a borrower will have to prove the original loan was being repaid until it reset to a higher rate and they must have 3 percent equity in the home. The FHA does not supply the mortgage loan but it guarantees loans extended by banks and other lenders.

1. The mortgage being refinanced must be a non-FHA ARM that has reset.

This means that you cannot currently be in a FHA mortgage and it's for non-FHA mortgage holders.

2. The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments.

In order to quailfy you CANNOT have any prior lates prior to the adjustment on your loan.

3. If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.

Not quite sure how to interpret this but I'm assuming that this means that in order to qualify with late mortgage payments then you need to have sufficient equity. Unfortunately, this will most likely cut 90% of homeowners out of the picture because their equity is dropping by the second and also many of the subprime mortgages are at 100% loan to value. So I'm assuming this will not help them in any way. I'm trying to remain positive about this but I also know the reality of what is REALLY going on in neighborhoods everywhere.

4. Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2), the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing.

This means that your existing loan may have penalties ro fess that FHA will not allow to be covered under the FHA Secure, so your lender will have to cooperate and waive those non-allowable debts. FHA will allow an approved second on your home.

5. Lenders must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage.

In order to qualify you must prove that the ONLY reason your were late on your mortgage was because your loan adjusted. No harships will be allowed. No lost jobs, no illness, nothing of the sort.

Additional Information about the FHA Secure Initiative:

What May be Included in the FHA Secure Mortgage Amount: FHA will permit the inclusion of the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges. FHA will also permit arrearages (principal, interest, taxes and insurance) to be added into the new loan amount.

Subordinate Financing under the FHA Secure Initiative: If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHA Secure first mortgage and any subordinate lien may exceed the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for no less than 36 months to not be considered in the qualifying ratios.

Educate Borrowers Regarding FHASecure: The FHASecure initiative will take effect almost immediately through administrative action. Counselors should understand this new opportunity and knowledgeably present it as a viable alternative for delinquent borrowers struggling to pay higher interest rates. HUD will soon publish a Mortgagee Letter providing additional and more detailed information regarding the new initiative.

I am following this very closely and I will post any new emerging information that I find.