May 7, 2008
MORTGAGEE LETTER 2008-13

TO:                ALL APPROVED MORTGAGEES
SUBJECT:        Expansion of FHASecure

In Mortgagee Letter 2007-11, the Federal Housing Administration announced FHASecure, a temporary initiative to permit lenders to refinance delinquent adjustable rate mortgages (ARMs) and/or to offer new subordinate financing where the combined loan-to-value ratio exceeds the applicable FHA loan-to-value ratio and geographical maximum mortgage amount.  The Department has decided to expand FHASecure as follows:

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.

The Senate has approved Federal legislation to provide much needed assistance to homeowners feeling the strain from soaring interest rates on subprime mortgages.

The bill that was approved gives the Federal Housing Administration (FHA) the authority to back refinanced loans for borrowers who have fallen behind on mortgage payments. Tens of thousands of borrowers could take advantage of refinance if the bill becomes law.

The reason these borrowers are in danger is that their adjustable-rate mortgages are “resetting,” which means the introductory interest rates are about to jump sharply to higher levels that they may not be able to afford.

With this Senate bill, the maximum insurable mortgage for the FHA will be raised from $362,790 to $417,000 in high-cost areas, on par with loans that Fannie Mae and Freddie Mac insure.

The measure is the first action taken to address the subprime mortgage crisis and give homeowners greater resources to avoid foreclosure.

“It is good before the Christmas season we have made a down payment on the solution to this problem…The government will not be able to fix all of the problems out there in the credit community. However, this is a first step, a good first step, and a good bipartisan step.” — Sen. Mel Martinez (R-FL)

The Federal Reserve Board’s changes to Regulation C have been approved to make data reported under the Home Mortgage Disclosure Act more reliable and useful.

In particular, the revisions will change the way that information on higher-priced mortgage loans gets reported.

Previously, Regulation C required when lenders must report the difference between the annual percentage rate (APR) on a mortgage loan and the yield on a Treasury security that was of the same maturity, known as a rate spread.

For worried homeowners who have mortgages with interest rates that are about to reset to dramatically higher levels, there could be relief as soon as the Treasury Department and leaders in the mortgage industry finalize a plan to freeze their rates.