Bush Administration Announces FHASecure Initiative to Assist Homeowners
On Friday, August 31, 2007, President George W. Bush announced a new Federal Housing Administration (“FHA”) initiative - FHASecure - that will assist nearly one-quarter of a million homeowners refinance and keep their homes. FHASecure is a temporary program (all loan applications must be signed no later than December 31, 2008) designed to provide refinancing opportunities to homeowners and to increase liquidity in the mortgage market. Under FHASecure, homeowners with strong credit histories who had been making timely mortgage payments before their loans reset, but are now in default, will be eligible for refinancing.
On Tuesday, the FHA released Mortgagee Letter 2007-11, which outlines the initiative and establishes the eligibility criteria. To qualify for FHASecure homeowners must meet the following criteria:
- The mortgage being refinanced must be a non-FHA adjustable rate mortgage (“ARM”) that has reset or will reset between June 2005 and December 2009.
- A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
- Three percent cash or equity in the home;
- A sustained history of employment; and
- Sufficient income to make the mortgage payment.
The Mortgagee Letter outlines additional requirements for obtaining a mortgage under the FHASecure program, such as obtaining a new appraisal and qualifying the borrower using FHA’s TOTAL Mortgage Scorecard to assess to the borrower’s ability to repay. In addition, the amount of the FHASecure mortgage may not exceed either the geographical maximum mortgage limits or the loan-to-value ratios outlined in Mortgagee Letter 2007-11. The FHASecure mortgage can include the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges. For more information on FHASecure program, click here.
