FHA Offers Relief to Homeowners with FHA Secure

President Bush recently announced that HUD’s FHA will be able to help an estimated 250,000 homeowners avoid foreclosure by enhancing some of its refinancing guidelines effective immediately.

The FHA secure initiative is a temporary program designed to provide refinancing options to borrowers of conventional adjustable rate mortgages (ARM) who are delinquent under their current mortgage as a result of an interest rate adjustment.

Eligible borrowers must be able to demonstrate that they were current in their mortgage payments prior to the interest rate adjustment of their ARM and are now delinquent due to the subsequent increase in monthly payments. Borrowers may be able to include the past due payments in their new FHA loan subject to FHA loan limits and loan-to-value limits.

Eligibility Criteria for FHA Secure Refinance Option:

• The current mortgage must be a non-FHA ARM
• The new FHA mortgage may be fixed or adjustable
• The borrowers’ payment history must show that they were current on their payments prior to their interest rate adjustment
• The borrowers must qualify for a new FHA mortgage using standard FHA guidelines
• If there is sufficient equity in the property, the new FHA loan may include past due mortgage payments up to the FHA loan limits
• Borrowers may obtain secondary financing if the new FHA mortgage is not sufficient to pay off the existing first lien plus closing costs

If you have an adjustable rate mortgage, and are delinquent due to increases in your interest rate, contact me or your current mortgage lender to see if this option can help you.

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What do I do if my mortgage lender shuts down?

If you are already making payments on a mortgage, you will continue to make the payments as you have in the past. You may receive a notice that the mortgage has been transferred to another lender but the terms of your mortgage will remain in effect until the mortgage is paid off. If you're concerned, call your current mortgage company at the customer service number located on your mortgage statement.

What if my mortgage lender shuts down before my loan closes?

Until recently, I worked for American Home Mortgage (AHM), the nation’s 10th largest lender. And, like many other lenders, AHM went bankrupt and shut down their mortgage operations with little to no warning. While this is hard for the employees of AHM and the other lenders that have had the same fate, what about the people who are in the process of purchasing or refinancing their homes? What do they do?

Unfortunately, in the case of AHM, borrowers with over $800 Million worth of mortgages went to the closing table on July 30 & 31 expecting to close on their loans. Since AHM had no money to fund these loans, these borrowers had to cancel their closings and re-apply for a mortgage with another lender. In many cases these loans that did not fund affected even more closings that were dependent on these closings.

What should I do if I am in this situation?

In this crazy market it pays to be prepared for the worst. The first thing to do is to make sure you are working with a true mortgage professional. I understand that rates and costs are important considerations, but it is more important to make sure the loan will get closed on time. That means working with someone experienced, competent and professional.

Second, make sure that you always keep copies of all of the documentation you provide to your lender. If the lender happens to run into trouble and you need to find another lender, you will be prepared. On the same note, make sure you get a copy of the appraisal from your lender as soon as you can. If you have to find another lender you can forward this appraisal to them to help speed up the process.

Third, don’t panic and just run to the first lender you see. If you are working with a professional loan officer, contact him or her and ask for advice. Chances are they are already working on taking care of their customers’ loans before you even know there is a problem.

I had several mortgages that were set to close in August. As soon as I knew there was a problem, I contacted my borrowers and assured them that I would find a lender to close their loans on time. Luckily, several national lenders, including GMAC Mortgage, put plans in place to help these customers who found themselves suddenly without a lender. All of the customers who chose to stay with me closed on time and at terms as good as, or better than, they had at AHM.

Some of my customers chose to contact another lender for their mortgage. I heard from a few of them and, unfortunately, they received rates and fees higher than they should have gotten. When you panic and you're desperate, the chance of having someone take advantage of the situation is greater.