Federal Housing Administration (FHA) announced earlier this month a new program “FHA Short Refinance” to help responsible homeowners who owe more on their mortgage than the value of their property. Starting September 7th, 2010 FHA will offer certain “underwater” non-FHA borrows who are current on their existing mortgage and whose lenders agree to write off at least 10% of the unpaid principal balance of the first mortgage, have the opportunity to qualify for a new FHA-insured mortgage.
There are qualifications that must be met. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner's primary residence. And the borrower's existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower's combined loan-to-value ratio to no greater than 115%.
To read more on this topic, you can refer to FHA’s published mortgage letter that provides guidance.
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