FHA “Underwater” Refinance

Many homeowners we speak with want to refinance their homes to get a better interest rate. Unfortunately, many of them owe more on their current mortgages than the home is valued at.

The message below about refinancing homes that are “upside down” or “underwater” and a new program that MAY end up helping a few of the responsible homeowners who have been limited in their ability to refinance due to declining market value of their homes.

Courtesy of Donnell Bowen, Regional Operations Manager, Cornerstone Mortgage Company:

“I wanted to put a word out about the refi  program that is set to release on September 7^th.  This is another enhancement to the Making Home Affordable  (MHA) Program .  I consulted with our Corporate Underwriting Team this morning about it.  NOT ONE investor has issued any directive regarding the program yet but we are waiting with bated breath!

Here is a link to the mortgagee letter detailing the Eligibility Requirements:  http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-23ml.pdf

Here are the highlights:

·         The home must be underwater

·         The borrower must be current on payments

·         The borrower must not be in a temporary or trial modification period

·         The existing mortgage lender must discount their mortgage by at least 10%

·         This is OPTIONAL for the existing mortgage lender

·         The total loan-to-value ration (LTV) must not exceed 97.75% after refinance

·         If there is a 2^nd mortgage, that lender must agree to forfeit their loan and take a $500 incentive

Or

·         If there is a 2^nd mortgage that gets Subordinated, the total combined loan-to-value ratios (CLTV) cannot exceed 115% of the value

·         If a borrower completes one of these refinances it will be reported to the credit bureaus in the same way that a short sale would

Given these requirements I don’t expect to see investors clamoring to offer this product…but then again I see new things on a hourly basis these days! Please stay tuned and the Operations Department here at Cornerstone will keep you updated with the latest developments.”

Time will tell whether or not this program will end up being accepted by the current secondary market investors (which is the only way the loan product can hit the streets and be offered to the public) or whether it will flatline before launch.

If you think you would qualify for this FHA “Underwater” refinance, contact Carrie or fill out the online prequalification worksheet to be ready for this loan product to become available.

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