As mentioned in the following, even if you are in foreclosure, FHASecure may be a loan for you. As you will see, they have fairly flexible policies.
Are interest-only non-FHA insured loans eligible for FHASecure
Yes. Interest Only ARMS and Interest Only Fixed Rate loans are eligible to be refinanced under FHASecure.
Does the borrower have to be delinquent to be eligible under FHA Secure?
NO. FHA has two categories under FHASecure; Conventional Delinquent and Conventional Non-Delinquent. The borrower's delinquency status will determine if they fall under the Conventlional-Delinquent or Conventional Non-Delinquent option. Borrowers do not have to be delinquent to be eligible for FHASecure. For borrowers who are currently delinquent and fall under the Conventional-Delinquent option, the delinquency must be a result of a recent reset (no exceptions).
Can the new FHA loan be an adjustable Rate Mortgage (ARM)?
Yes. The new FHA loan may be a Fixed Rate, One Year ARM, or a 3/1 Hybrid ARM
Are there a maximum number of months of delinquent payments that a lender can roll into the new mortgage?
No. Homeowners with sufficient equity in their property may include the entire delinquency into the first mortgage as long as doing so does not result in exceeding the maximum FHA loan-to-value ratios and the loan limits for the area.
What are the maximum LTV and CLTV?
The L TV of the FHA first mortgage is capped at the regular FHA maximum L TV, based on property state and value. There is no maximum CL TV. The combined loan amount of the FHA first mortgage and the subordinate financing may exceed the FHA maximum L TV and mortgage limits for the county.
Is there a maximum dollar amount of the subordinate lien?
No. There is no cap on the dollar amount of any subordinate mortgage.
If the reset has not yet occurred, but the borrower has experience reduced income and will not be able to make mortgage payments after the reset, can the FHASecure program be used to refinance the loan now?
Yes. The borrower may be eligible for FHASecure under the Conventional Non-Delinquent option.
Can the borrower receive any cash back from the FHASecure refinance?
Yes. The FHASecure is either a rate and term refinance option which permits the borrower to receive no more than $500 back at closing or a cash out option to pay off tradelines/credit cards, total to not to exceed the loan limit for the county
The borrower’s pay history relected late payments over 12 months prior to the date of the reset, but is now current. Is this loan eligible for the FHASecure refinance option?
Yes. The loan may be eligible for FHASecure under the Conventional NonDelinquent option.
The credit report shows the borrower had some late payments on other debt obligations within the 6 months prior to the reset. Is this acceptable.
Standard FHA underwriting criteria are used to evaluate the borrower payment history on other obligations. Some late payments are ok.
The borrower is currently in foreclosure. Can this borrower be refinanced using the FHASecure program?
Can foreclosure fees and costs be included in the new FHA first mortgage?
Yes. Foreclosure related fees and costs may be included in the FHA first mortgage. Lenders may also include reasonable and customary costs that are standard servicing practices and are included in all payoff statements.
What is the value of the FHASecure program to mortgage lenders?
Only FHA-approved lenders can originate FHASecure loans. FHA Secure could benefit lenders by helping them avoid foreclosure expenses. Even if a lender takes a short payoff in order to originate an FHA Secure loan, it is still less expensive than foreclosure and disposition of the property.
Can FHA help borrowers who are delinquent prior to reset?
Borrowers are not eligible for the FHASecure program. Borrowers would have to credit qualify under the Standard FHA Rate & Term refinance program and follow standard FHA guidelines.
Can FHA assist borrowers who are current on their mortgage buy facing an ARM reset?
Yes. FHA has expanded the FHASecure program to include borrowers who are currently not delinquent on their first mortgage loan. Under the Conventional-Non Delinquent option, any type of conventional mortgage loan maybe refinanced including fixed rate.
Under the FHA Secure, are there restrictions on secondary financing, seasoning requirements for existing liens and/or a limit on the combined loan to value (CLTV) ratio?
FHA Secure does not change FHA's underwriting requirements. Therefore, existing FHA policies regarding secondary financing are applicable:
· repayment terms of the second must not have a prepayment penalty or provide for a balloon payment before 10 years;
· any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount;
· the first and second liens cannot exceed the borrower's reasonable ability to pay
· However, second mortgages that are deferred for more than 36 months need not be considered in the qualifying ratios. (Refer to HUD Handbook 4155.1 REV-5, paragraph 1-13 C 2 and 3)
· As a reminder, the FHA insured mortgage must be in the first lien position.
· There is no CLTV limit.
· If the existing second mortgage originated and disbursed simultaneously with the non-FHA ARM, there is no seasoning requirement.
However, lenders are again reminded of existing FHA policy: if any portion of the funds of an equity line of credit in excess of $1 ,000 was advanced within the past 12 months and was used for purposes other than repairs and rehabilitation of the property, the line of credit is not eligible for inclusion in the new FHA mortgage
If the borrower took out a second mortgage after closing on the non-FHA ARM, can this be included in the new FHA loan amount? No. The second mortgage must have been a purchase money second mortgage taken out at the same time with the first mortgage.
Does the second mortgage have to be an existing second or can the borrower take out a new second?
The subordinate mortgage can be new or existing
Will there be any changes to appraisal protocols since appraised values are declining?
FHA will be focusing more attention on reviewing appraisals in declining markets. Mortgage lenders are reminded of their responsibility to ensure that appraisers are providing accurate property valuations. A declining market could be as small as a neighborhood or as large as an entire state, and no standard definition exists other than home prices are falling.
Will FHA adjust its Credit Watch termination policies for lenders who participate in FHA Secure lending?
FHA Secure does not change FHA's underwriting guidelines, and FHA does not expect to see higher default and claim rates with these loans. As with all its programs, FHA will pull files in declining markets at a greater frequency as part of its normal risk management strategy.
What additional documents will be needed from the borrower for the FHA Secure Program?
This will be case specific. At minimum, we will need a copy of the non-FHA ARM first mortgage Note which indicates the date the loan reset. The Credit Report will indicate the dates the borrower became delinquent on the mortgage.
Will the FHA Secure program be able to assist all borrowers whose mortgage is currently delinquent due to a reset?
While the program is intended to assist as many borrowers as possible facing financial difficulty as a result of a reset of their mortgage, some borrowers may not qualify for the loan payments (especially those who previously qualified using Stated Income or No Doc loans). Also, for borrowers with high L TV loans in declining markets, there may not be sufficient equity for the FHA Secure loan. The borrower may experience difficulty in obtaining secondary financing to cover the difference.
Are there any pricing adjustments specific to the FHASecure option?
FHASecure will use the existing FHA rates and pricing No additional adjustments have been applied for the FIHASecure option
Are payment option non-F:HA ARMs eligible for refinancing under FHASecure? Yes, FHA now allows the payoff of Payment Option Arm (POA) under the FHASecure program
If we require a 6 months current mortgage history before the reset of the ARM, do we still need a 12 month history in the property before we can use FHASecure?
Though we believe this to be a rare occurrence, if the borrowers purchased their home less than a year ago with a non-FHA ARM, FHASecure is available to them and only the 6 month payment history is applicable
If the property was acquired less than 12 months ago, will the amount used for determining the loan to value be the current appraisal or the original sales price I acquisition cost?
FHA anticipates that some values have fallen and will rely on the current appraisal without the need to see the original sales price or acquisition cost
Can a non-owner occupant be added to the loan for the benefit of qualifying the occupants for FHASecure?
Yes. For FHASecure (which is a lifeline to save the home) and rate and term refinances, a non-occupant co-borrower could be added
Is there any leeway in FHA’s definition of “Current” in the 6 months prior to reset?
Must borrowers be current on all obligations in the six months prior to reset?
Borrowers must have paid their mortgage payment within the month due for the six months prior to reset, and must meet FHA's standard underwriting criteria as it relates to all other aspects of the loan