I don’t know if this is a good deal or not, I am often not certain about the usefulness of government programs until I see them in action, but assuming that it is good, HUD has a new program coming out that will assist underwater NON-FHA home owners. This means negative equity position is the first requirement for the program.

 Making Home Affordable Program

This is an enhancement to the existing Making Home Affordable Program (MHA) and should give a greater number of responsible borrowers an opportunity to remain in their homes. “These enhancements are designed to maintain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan.” according to HUDs’ mortgagee letter 2010-23. “The opportunity allows borrowers who are current on their mortgage to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10 percent.”

Who is helped?

The question that immediately came to my mind was, “Who will this help?” Answer, anyone that got a first and second to buy a home and haven’t been able to qualify for the Fannie Mae or Freddie Mac refinance programs due to the existence of the second mortgage. Rather than having to sell on a short sale, home owners may now get the same benefit and retain their home while getting into a lower cost FHA loan.

Fine Print

As with all things, these loans are not for everyone and not everyone will qualify. For example, the first mortgage has to be current and no behind in payments. The loan to value on the first mortgage can not be any higher than 96.5% based on current value. So, if you owe $300,000 on you home and it appraises at $250,000, you could get a loan for $241,250 and the lender would need to agree to write off $58,750 which would probably still net them more than a short sale or foreclosure would.

But if there is a second in place and they won’t negotiate balance, there could be some difficulty. In a case where there is a second involved that was used to purchase the home, the maximum CLTV (combined loan to value) is 115%, “Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent.”

The home owner must still qualify for the new loan, but there may be some latitude on credit scores, but that will depend on the lender’s overlays. These enhancements are effective for loans with case numbers issued on or after September 7, 2010, which are closed on or before December 31, 2012.. These enhancements include loss coverage to be provided from funds under the Emergency Economic Stabilization Act of 2008, as amended (EESA). If the availability of such coverage is delayed beyond September 7, 2010, implementation of these enhancements will also be delayed.

If you have tried to take advantage of current low rates to refinance but haven’t been able to do so because of negative equity, they may be an ideal solution for you. The roll out of the program is less than a month away and negotiations are going to need to be done with the lien holders, so it is not too soon to start planning for the program.

Contact me

Navigating the mortgage approval process can be daunting. You need someone on your side. I am available right now to help you with the loan process and know the ins and outs of FHA, VA, USDA and conventional financing. If you want to buy a home using an FHA loan or refinance using VA, I am here to help. Contact me at Alpine Mortgage Planning, 1200 Executive Pkwy., Ste. 100, Eugene OR 97401, 541-342-7576/541-221-3455 cell or by e-mail. Only you can make the choice it is time to get the process started.

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