What Is a FHA Secure Refinance?

Over the last few years HUD announced FHA Secure, Hope for Homeowners and the FHA loan modification in an effort to mitigate home foreclosures and FHA loan defaults that have been devastating the housing sectors over the last few years. New FHA home mortgage refinance loans enable homeowners with bad credit to qualify for fixed rate refinancing up to 97% loan to value. The FHA secure loan offers new refinance opportunities to homeowners who have been late on their mortgage payment since their rate reset. Consumers across the country are flocking to the affordable home loans that help borrowers escape from their escalating adjustable rate mortgages.

FHA Loan Modification for Foreclosure Prevention

Obama expanded the capabilities for the Home Affordable Modification Program, also known as HAMP. The FHA modification plan offers a “principal reduction”. HAMP encourages lenders to lower the mortgage balance on the existing loans that is greater than the property’s value. The government continues to make strides to reduce FHA foreclosure losses which have increased to over 300,000 loan defaults per month.

In a speech a few years ago, George Bush discussed a new government initiative designed to offer affordable fixed rate solutions for homeowners who have high rate ARMs. To prevent future foreclosures, the government is offering a new bad credit FHA loan program. “FHA Secure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates,” said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. The FHA Secure plan is a good way of avoiding foreclosure and refinancing your ARM (adjustable rate mortgage).

The plan provides fixed rate refinancing for families with strong credit histories who are now in default as a result of their mortgage payments now being unaffordable. To qualify:

  • You must have good payment history before the teaser rates expired and your loan reset.
  • The reset of the interest rates on your loan must occur between June 2005 and December 2008.
  • You must have 3% cash or equity in your home. Example: if your house is appraised at $100,000, you must have an outstanding mortgage balance of $97,000 or less.
  • You must have a sustained history of employment and sufficient income to make the mortgage payment.
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The HUD newsletter from August of 2007 indicated that the FHA Secure initiative will operate under the same safe guidelines as the FHA’s existing mortgage insurance program without affecting FHA’s financial health. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA’s insurance fund at no cost to the taxpayer. It also indicates that FHA will implement risk-based premiums that match the borrower’s credit profile with the insurance premium they pay (i.e., riskier borrowers pay more). This common sense, risk-based pricing structure will begin on January 1, 2008.

The FHA Secure Plan is Only Temporary

A Google News article on PR-GB.COM, entitled Is Your ARM Adjusting and Your Mortgage Rates Going Through the Roof? – FHA to the Rescue!, reports that the FHASecure plan is a temporary program, and applications must be signed no later than December 31, 2008. Fixed rate home loans are very hard to come by these days, especially if you have bad credit. So, if you’re interested in taking advantage of these government home loans, you’d better talk to a lender ASAP. See Hope for Homeowners and HAMP for FHA modification and mortgage relief options.