FHASecure
Presented by:
US Department of Housing and Urban Development (HUD)
Last Revision: 10/30/07
General
Assist borrowers currently in a conventional loan ♦Delinquent
Result of the ARM reset Must meet all eligibility criteria for FHASecure Combined loans may exceed CLTV and maximum mortgage limits
♦Not Delinquent
Combined loans may exceed CLTV and maximum mortgage limits Must meet regular No-Cash-Out (NCO) refinance criteria
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General (cont’d)
♦Program available until December 31, 2008 (Mortgagee Letter 2007-11) ♦Any FHA lender can originate ♦May be refinanced to an ARM loan (one-year or hybrid) ♦A second mortgage may be taken at the time of closing for the amount not eligible for inclusion in the FHA insured first mortgage. ♦FAQs can be accessed at www.fha.gov
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BENEFITS
♦Helps borrowers stay in their homes and preserves communities ♦Could assist nearly 80,000 additional borrowers ♦Permits an opportunity for borrowers to refinance into a prime-rate FHA insured mortgage ♦Help lenders avoid foreclosure expenses ♦No CLTV limit or seasoning requirement for purchase money seconds
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Eligibility
♦Single-Family (1-4 units) ♦Owner-occupied, principal residence ♦Must meet FHA underwriting criteria for new loan ♦Current FHA geographical maximum mortgage limits apply (for FHA-insured first mortgage) ♦Current FHA maximum loan-to-value limits apply ♦May cover existing first lien, purchase money second, closing costs, prepaid expenses, discount points, late charges, arrearages, foreclosure expenses, and other costs
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Eligibility - Delinquent
♦ ♦ ♦ ♦ Conventional ARM that has reset Must be currently delinquent Delinquency resulted from reset The previous consecutive 6 months of payments, prior to the reset, was made within the month due ♦ Must have sufficient equity in home OR ♦ Lender can take a 2nd mortgage for amount not included in FHA-insured first mortgage OR ♦ Current lender agrees to write off the amount not eligible for inclusion in FHA-insured mortgage.
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Eligibility – Not Delinquent
♦All conventional to FHA No-Cash-Out refinance loans (also called Rate and Term)
♦CLTV not a consideration (LTV or maximum mortgage limits) ♦No seasoning requirements (2nd liens do not have to be seasoned for one year, and additional mortgage calculation is not required) ♦2nd liens may be subordinated without consideration of CLTV ♦Delinquent/derogatory debts resulting from the borrower choosing to pay the mortgage instead of other obligations is an underwriting consideration
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Underwriting
♦FHASecure does NOT modify or waive FHA underwriting guidelines and requirements Basic eligibility (owner-occupancy, SSN, CAIVRS, LDP, GSA, etc.) Willingness: Credit history analysis, including explanations and/or documentation EXAMPLE: A borrower has insufficient income to pay the increased mortgage amount after the reset, along with other debts. They chose to pay the mortgage, resulting in other debts becoming delinquent. If the derogatory items can be documented as resulting from the reset, that should not inhibit an approval of a regular NCO refinance.
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Underwriting (cont’d)
Income/Employment • Ability – best indicated by ratios (if exceeded, may use valid and sufficient compensating factors) • Stability – two years employment history and expectation income level will continue for first 3 years of the loan • Note: If 2nd mortgage payments are required within first 36 months, must include in ratios. Assets (if required for closing) ♦The lender must specify in the Remarks section of the HUD92900-WS how they determined that the reset resulted in the delinquency
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Underwriting (Cont.d)
♦Lenders may use TOTAL Scorecard, but are reminded that manual underwriting is required if a “Refer” result is received ♦Documentation
♦Standard FHA refinance loan documentation ♦Evidence of the ARM reset (Delinquent and, as applicable, Not Delinquent loans) ♦Payment history showing that, prior to reset, the borrower made the previous 6 months of mortgage payments within the month due (Delinquent loans only)
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Lender Responsibilities
♦Encourage borrowers to seek advice on tax consequences of debt write-off ♦Ensure accurate property valuations in declining markets ♦Refrain from soliciting homeowners to cease making mortgage payments in order to qualify for FHASecure
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Contact Information
FHA Resource Center 1-800-CALL FHA (800-225-5342) hud@custhelp.com HUD-Approved Housing Counseling Agencies 1-800-569-4287 HUD’s Loss Mitigation Center 1-888-297-8685 Lender Approval and Recertification Division E-Mail: FHALender@hud.gov Voice Mail: 202-708-3976 HUD Web Site www.fha.gov
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Thank You!
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