| FHA program to help refinance delinquent mortgage loans |
| By Janet Hobbs |
Published
08/6/2008
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FrontPAGE - Business
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Adjustable Rate Mortgages (ARMs) reset to unaffordable rates
You can hardly pick up a newspaper or turn on the radio without hearing about declining home values and mortgage delinquencies when adjustable rate mortgages (ARMs) reset to unaffordable rates. The problem is growing more severe as people face job losses or are simply overwhelmed by spiraling costs for food, gasoline and other daily necessities.
The Federal Housing Administration (FHA) has developed a new program to help, called FHA Secure. The program is a temporary initiative to permit financers like Fifth Third Bank the ability to refinance delinquent adjustable rate mortgages and/or offer new financing in some cases. Borrowers must demonstrate that they were current on payments before they experienced an extenuating circumstance such as job loss or a rate reset.
The following are some of the eligibility criteria for loan refinancing under FHA Secure:
Borrowers current on their mortgages
· The mortgage being refinanced must be a non-FHA fixed rate or adjustable rate mortgage.
· Borrowers will need to demonstrate their mortgage payment history through the mortgage servicer or through cancelled checks to determine if it is acceptable under FHA’s standard underwriting guidelines.
· Borrowers must have sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage as well as pay other recurring obligations.
Borrowers delinquent on their mortgages
· The mortgage being refinanced must be a non-FHA adjustable rate mortgage.
· When refinancing a delinquent mortgage where the delinquency was caused by a rate reset or the occurrence of an extenuating circumstance the borrower’s payment history must show that:
1. The borrower was making the monthly mortgage payments within the month due during the six months prior to the rate reset or extenuating circumstance, or
2. In the 12 months prior to the rate reset or extenuating circumstance the borrower’s payment history shows no more than one 60-day late payment or two 30-day late payments. Borrowers with less than a full 12 months payment history (i.e., 7-11 months payment history) must show that they have made their monthly mortgage payments within the month due during the 6 months prior to the rate reset or occurrence of the extenuating circumstance; or
3. If the borrower is unable to meet the payment history requirements specified above, the lender may still proceed with the refinance transaction provided that the loan-to-value ratio on the new FHA-insured mortgage does not exceed 90 percent and the borrower has no more than one 90-day late or no more than three 30-day late payments over the 12 month period prior to the rate reset or extenuating circumstance.
· Mortgagees must determine that the rate reset or extenuating circumstance that caused the delinquency does not affect the borrower’s overall capacity to repay the new FHA-insured mortgage.
· Borrowers delinquent on their interest only and/or payment option ARMs must demonstrate that the delinquency was caused by a rate reset and that they were making their monthly mortgage payments within the month due during the 6 months prior to the rate reset.
· Mortgagees must determine that the borrower has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage as well as pay other recurring obligations.
In either case, if your home doesn’t have sufficient equity, there are other restrictions that apply.
While there is no magic wand for the current mortgage and housing crisis, seeking help early – before the problem gets out of hand – will provide you with the most flexibility. And taking appropriate steps will help you feel more secure and in control of your situation.
Stop into any Fifth Third banking center to find out about all available options for dealing with these complex situations. And if you know of anyone who may need help with these issues, please let them know so we can help guide them through this difficult time.
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