On August 6th, 2010, FHA published Mortgagee Letter 2010-23 which details the refinance program available to homeowners that owe more than the value of their homes. Although HUD estimates an economic benefit up to $35 billion, the success will be determined by the current lien holders who must participate by writing down the mortgages at least 10%. The program is for loans whose case numbers are issued on September 7th, 2010 and closed by December 31st, 2012.
Here are the 8 things you need to know about this program:
- The mortgage to be paid off CANNOT be an FHA loan and must be current
- The max LTV is 97.75% and the max CLTV is 115%
- Second lien holders must subordinate to the new first
- Loans that receive an "accept/approve" by TOTAL do not require a review of income or credit history
- Loans that receive a "Refer" by TOTAL and/or manually underwritten files, the ratios CANNOT exceed 31/50 (31% includes both 1st and 2nds) and must have acceptable credit history with a minimum credit score of 500
- Lenders CANNOT use premium pricing to pay off debt to qualify borrower OR bring mortgage current for the borrower
- The performance of loans refinanced under the NegEQ refinance WILL NOT be included in the Lender's compare ratio but will have separate criteria in Neighborhood Watch
- The borrower must occupy the subject property
