Earlier this week on September 7th, 2010 the Obama administration launched a new “short refinance” mortgage assistance program. This program targets homeowners that are current on their mortgage and underwater. Essentially, these homeowners owe more than their property’s worth.
According to HUD.gov:
“Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.”
“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”
The “short refinance” program reduces mortgage balances for homeowners. Yes, that’s right. Through the program lenders can reduce the amount you owe on your home. The new mortgage is written down to less than the current value of the property and backed by the government in a Federal Housing Administration (FHA) loan.
A few key highlights of the new “short refinance” program’s eligibility requirements*:
- Homeowner must be current on mortgage
- Homeowner must owe more than their property is worth
- Homeowner must meet FHA underwriting requirements and have a credit score of 500 or above
- Homeowners must live in the property as their primary residence
- The current mortgage must not be an FHA loan
* Click here for detailed program information from HUD.gov.
If you’re interested in applying for the program, contact your lender.
Read the Wall Street Journal’s article Government to Deploy Broader Mortgage Aid for more details about the program.
What are your thoughts on the new Obama administration “short refinance” program? Do you think it will help or hurt the real estate market?