FHA Secure

Eligibility

Are borrowers more than 90 days behind on their mortgages eligible?

Yes. There is no limit to how many mortgage payments you have missed or how many months since your last payment. The refinance amount will be determined by the home’s value and the amount you owe. The lender may also consent to taking back a second mortgage to narrow the gap between home value and what you owe.

Are only delinquent borrowers eligible? Is there a time limit to their delinquency?

While delinquent borrowers only are eligible for FHA Secure, borrowers who are current on their mortgages can still get help. Non-delinquent borrowers will be able to refinance their mortgages to be backed with standard FHA insurance. Lenders, if they so choose, can also offer borrowers a second mortgage to bring the amount owed closer to the value of the home. The FHA urges homeowners to refinance before their interest rates reset and they can no longer afford payments.

What about struggling borrowers with fixed-rate mortgages?

If you are struggling with payments on a fixed-rate mortgage, your best advice is to get in touch with your lender and inquire about assistance programs they may offer. If communication with the lender fails, borrowers can also contact a HUD-approved counseling agency to learn more about what programs are available.

How about homeowners with interest-only mortgages? Do they qualify for FHA Secure?

They do, if their mortgages are also adjustable-rate mortgages. Currently, interest-only mortgages that are fixed-rate and not backed by the FHA, and mortgages that have buy-down features in them, do not qualify for FHA Secure. However, this adjustable-rate-mortgage-only policy may be amended in the future by the FHA.

Do borrowers already in foreclosure qualify for FHA Secure?

Homeowners who are now in foreclosure may be eligible for FHA Secure, but it depends on their individual situation. Their eligibility will really be determined by the gap between home value and amount owed, and whether their lender will agree to offer them a second mortgage. If you are facing foreclosure, the FHA strongly suggests that you discuss the matter with your lender or a housing counseling agency approved by HUD.

Paying Off Your Mortgage

What do I do if I can’t refinance because I have a prepayment penalty and low home equity?

In cases where borrowers don’t have enough equity in their homes so they can add the prepayment penalty (or other costs of refinancing) into their new FHA-insured mortgages, they are advised to ask their lenders about offering a second mortgage to make up the difference. Whether the second mortgage is offered or not is solely the lender’s decision.

The average home price in my neighborhood is above the FHA loan limit for the area. Are loan limits going to change?

The FHA’s loan limits and insurance levels vary geographically; these levels are set by law. No FHA-insured mortgage may exceed these limits. However, by having a first and second mortgage combined, you may find that the amount of the second exceeds your area’s the maximum loan limit.

What if my home’s value is lower than what I have to pay?

If the amount owed is higher than the value of the property, the mortgage lender that is considering the refinance would have to agree to a short payoff on the existing loan, or to offer a second mortgage to fill the difference between the mortgage and the home’s value.

Can first and second mortgages both be included in FHA Secure?

Yes they can, as long as the combined amount of the mortgages falls within the FHA’s geographical loan limit. If this total amount is above the loan limit or the loan-to-value limit, see your lender about taking a second mortgage to bridge this gap.

General

How does FHA Secure help homeowners keep their homes?

If you have a non-FHA adjustable-rate mortgage (ARM) whose interest rate has reset to a high level after a “teaser” introductory period, FHA Secure can help you refinance into a mortgage that is insured by the FHA.

To be considered eligible for the program, homeowners must have a record of making mortgage payments on time over the six months before the resetting of their loans and they must have fallen into delinquency because of that reset.

Lenders cannot automatically disqualify you because of delinquency when you are in the FHA Secure program. You may even be offered a second mortgage to account for the price difference between your home’s value and the amount you owe on it, plus standard refinancing costs.

What are the benefits of refinancing into an FHA-insured mortgage?

FHA-insured mortgages are designed with the best interests of the consumer in mind. They will not include any prepayment penalties, balloon payments or initial teaser rates, and they are offered at market rate at 30-year terms with full amortization, so that the borrower is always paying towards interest and principal each month.

Won’t people who should have never even gotten a home loan to begin with benefit from this program?

Anyone who applies for the FHA Secure program must qualify for an FHA-insured mortgage. Therefore, those borrowers who shouldn’t have received a home loan at all cannot qualify for any FHA refinancing programs. All borrowers in this predicament should seek assistance from their lender or a HUD-approved housing counseling agency.

Why is the FHA sponsoring this program if it isn’t designed to help all homeowners?

FHA has offered this program specifically in order to stem the tide of foreclosures and home vacancies. The motivation for this is so that vulnerable communities do not have to suffer from declining home values and the price of lost government resources.

How much will taxpayers be responsible for paying?

FHA Secure and other refinance programs are being provided at zero cost to the taxpayer. It is the borrower’s responsibility to pay insurance premiums on the FHA-backed mortgage. At the same time, the program helps that borrower avoid foreclosure, which would result in added costs to the locality in the form of lower revenues.

Does FHA Secure help responsible homeowners who make their payments on time?

All homeowners who have been current on their mortgages qualify for an FHA refinance if it is in their best interest. Homeowners with non-FHA adjustable-rate mortgages, meanwhile, can refinance into an affordable FHA-backed mortgage if they are current, but owe more than their home’s value. These homeowners can also check with their lender about putting a second mortgage into effect at closing to make up this difference in price.