Jeff Tumbarello, Loan Officer

614 339 1256 Direct Line

 

SUBJECT:   The FHASecure Initiative and Guidance on Appraisal Practices in

            Declining Markets

 

 The Federal Housing Administration is pleased to announce an initiative that will enable

homeowners to refinance various types of adjustable rate mortgages (ARMs) that have

recently reset. This mortgagee letter describes how lenders and homeowners may

refinance mortgages that, due to the increased mortgage payment following the reset, have

become delinquent.  The mortgagee letter also reiterates guidance to lenders about making

objective decisions regarding the underlying collateral in declining markets. The FHASecure

initiative, which is a temporary program designed to provide refinancing opportunities to

homeowners and to increase liquidity in the mortgage market, requires that the loan

application be signed no later than December 31, 2008.

 

Refinancing Non-FHA Adjustable Rate Mortgages Following Resets

 

FHA is currently doing a significant business in refinancing non-FHA mortgages for

borrowers who are current under their existing mortgage.  This mortgagee letter extends

eligibility to borrowers who became delinquent under their current mortgage following the

reset of the interest rate.

 

This mortgagee letter explains

credit policies for refinance transactions involving non-FHA adjustable rate mortgages where

the homeowners mortgage payment history during the 6 months prior to the reset showed

no instances of making mortgage payments outside the month due.

 

These instructions are designed to permit homeowners, who previous to their reset,

demonstrated an ability to meet their mortgage obligations, an opportunity to refinance into

a prime-rate FHA-insured mortgage.  In many cases homeowners may be permitted to

include mortgage payment arrearages into the new loan amount, subject to existing

geographical mortgage limits and the loan-to-value limit shown below.

 

Eligibility Highlights of the FHASecure Initiative

 

•·          The mortgage being refinanced must be a non-FHA ARM that has reset.

•·          The mortgagors payment history on the non-FHA ARM must show that, prior to the reset

of the mortgage, the mortgagor was current in making the monthly mortgage payments,

i.e., the homeowners mortgage payment history during the 6 months prior to the reset

showed no instances of making mortgage payments outside the month due.

If there is sufficient equity in the home, under additional eligibility instructions provided

•·          below, FHA will insure mortgages that include missed mortgage payments.

Under certain conditions explained below, FHA will insure first mortgages where (1) the

existing note holder writes off the amount of indebtedness that cannot be refinanced into

the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage

or the existing note holder may take back a second lien that includes closing costs,

arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV

and maximum mortgage amount limits.

•·          Mortgagees must determine, as part of the underwriting process, that the reset of the

non-FHA ARM monthly payments caused the mortgagors inability to make the monthly

payments and that the mortgagor has sufficient income and resources to make the monthly

payments under the new FHA-insured refinancing mortgage.

 

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