FHA Short Refinance Option
by DESPERATE in Connecticut
Ask Kate about FHA short refinance option, HAMP loan modification, HAFA short sale and deed-in-lieu: Hi Kate, We had to take a subprime mortgage 5 years ago due to a medical bankruptcy. We paid off the bankruptcy but had to hold the mortgage for 2 years. Well, 2 years later our home which was worth $375 is now worth $285.
Our mortgage rate is at 11.5%. We are under water 100k. We have NEVER missed a payment but we cannot get help.
Our credit score is 750. My husband makes 150k.
We were in bankruptcy due to extensive medical bills but we paid everyone off. We have an excellent history since but NO one will touch us due to the requirement to have a Fannie Mae Freddie Mac mortgage.
What do we do? There is no program for us. We did everything we should have. We PAID everyone off.
My husband works 60 hours a week so IF we walk away from the home we will be sued.
What do we do? DESPERATE
Kate answers FHA short refinance option, HAMP loan modification, HAFA short sale and deed-in-lieu:
You have been trapped in the eye of the tornado.
Like you, many homeowners held up their end of the bargain and made their subprime mortgage payments.
But after the prepayment penalty period
ended, very few opportunities remained for refinancing out of exorbitant interest rates.
That's why when real estate values began to decline in 2007, I authored Powerful Cure For Subprime Mortgages
There's no question that the entire subprime mortgage aftermath stinks. Big time. Even so, I have a few suggestions which I hope could be viable options.
So let's get started. Follow the links for more helpful information on my website.
FHA Short Refinance Option
FHA short refinance lowers your interest rate and reduces a chunk of the principal balance.
This option from Making Home Affordable is for an owner-occupied mortgage NOT currently financed with the FHA loan. The mortgage must be in a negative equity (underwater) position.
Additional rules of the road for the FHA Short Refinance...
- Your mortgage CANNOT be owned or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA.
- Your mortgage payments must be current.
- Your debt payments cannot be greater than 55% of your gross monthly income.
- Standard FHA underwriting guidelines apply.
- Your lender or loan servicer participation is voluntary.
The major sticking point with me is that no one in authority addresses whether the principal reduction will be adversely reported to credit bureaus. But you could come out of the process with a stable FHA home loan, albeit with mortgage insurance.
I question whether the FHA short refinance option will be around much longer. Hopefully it will be replaced with the proposed Obama Refinance Plan
. Based on the preliminary details, it looks like a plan that fit your situation.
Watch the blue box for updates at Ask Kate! Home Affordable Refinance Program Updates
HAMP Mortgage Loan Modification
HAMP, the Making Home Affordable Loan Modification Program, discloses that it could adversely affect your credit. But HAMP does lower monthly house payments!
It also does NOT require your mortgage to be backed by Fannie Mae or Freddie Mac. So if you occupy your home (and sometimes even if you've moved out) as your primary residence, call your loan servicer to make application.
For the latest updates on HAMP, go to HAMP 2 Mortgage Rate Reduction and Modification News
for more information.
HAFA Short Sale and Deed-in-Lieu
Home Affordable Foreclosure Alternatives (HAFA) short sale completely releases you from your mortgage debt after selling. This deficiency is guaranteed to be waived by the servicer.
With a HAFA deed-in-lieu (DIL), the mortgage company lets you transfer ownership back to them via a deed.
The Making Home Affordable program claims HAFA has a less negative effect on your credit compared to traditional foreclosure or conventional short sales. HAFA provides $10,000 (increased from $3000) in relocation assistance upon closing.
But HAFA is only available to those with a Fannie Mae or Freddie Mac backed mortgage. Then why did I mention it? Because homeowners can also use HAFA if they are serviced for HAMP loan modification payments.
Go to HAFA Short Sale and Foreclosure Alternatives vs Strategic Default
for more information.
Making Home Affordable Programs
Get a bird's eye view of all Making Home Affordable plans at Special Edition Making Home Affordable Options
, including FHA short refinance option, HAMP loan modification, HAFA short sale and HAFA deed-in-lieu.
Good luck and best wishes,
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