The head of the FHA announced that the details of the new short refi program from the FHA should be available soon. Here are some bits from the HousingWire article on the subject:
US Department of Housing and Urban Development (HUD) secretary Shaun Donovan said details for a new “FHA Short Refinance” program would be announced this week, while speaking at the National Association of Real Estate Brokers (NAREB) conference in Fort Worth, Texas Tuesday.
According to a mortgagee letter sent out today, the new program would provide additional refinancing options to underwater homeowners starting Sept. 7. To be eligible for the new loan, the homeowner must be underwater but still current on the mortgage. A credit score of 500 or better is required, and the borrower’s existing first-lien holder must agree to write at least 10% of the unpaid principal balance.
It must bring the borrower’s combined loan-to-value ratio to no more than 115%. The existing refinanced loan cannot be an FHA-insured one. Once refinanced and insured by the FHA, it must have a loan-to-value ratio of no more than 97.75%.
Keep in mind that lenders must agree to the principal write down for this program to work and lenders have historically not been thrilled with that idea. The article continued:
Market players have come out saying a government-induced refinancing wave is unlikely. Barclays Capital, Credit Suisse and JPMorgan Chase have each said such a program would require too many logistical hurdles and would deviate away from recent monetary policy.
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