The Federal Housing Administration has proposed a plan that will encourage lenders to reduce principal amounts and allow refinancing for homeowners whose home loan is underwater. Underwater homes have been a big problem for many homeowners across the nation as properties have lost value and many homeowners have suffered as a result. There have even been cases where homeowners have lost such a substantial amount of value in their home that homeowners were either unable to make their mortgage payment or simply walked away in frustration.
However, this program termed the FHA Short Refinance option is set to aid individuals who owe more on their mortgage than their home is actually worth, which again has been a common problem for many homeowners. Yet, changes to this program have been put into place to assist homeowners who may not have an FHA home loan but, if a homeowner is current on their mortgage and their primary lender agrees, may be able to qualify for a new FHA-insured mortgage.
While this FHA refinance program and principal assistance initiative will not be required, some lenders may be willing to allow homeowners to participate in this program if they owe more on their mortgage than their home is worth and are current on their existing mortgage payments. FHA home loans require that a homeowner also have a credit score equal to or above 500 and, again, the lender who holds the first lien on the home must be willing to work with a homeowner in this program and write off 10% of their unpaid principal balance.
These changes in this FHA program is for homes that are not currently FHA-insured home loans but are cases where homeowners may benefit from this type of FHA assistance. Homeowners who may have a second lien on their home loan may still be able to take advantage of this program as incentives will be provided to second lien holders who agree to forgive a homeowner of all of or part of a lien on their home so that they may be able to take advantage of this new mortgage assistance initiative from the Federal Housing Administration.