Effort designed to encourage principal write-downs for responsible borrowers   

WASHINGTON – In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today will begin providing an additional refinancing option for underwater borrowers. Originally announced in March, this enhancement of Federal Housing Administration (FHA) refinance program will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lien holders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage. 

The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – also known as being ‘underwater’ – because their local markets saw large declines in home values. As announced earlier this year, this change as well as other programs that have been put in place will help the Obama Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. 

Participation in FHA’s short refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements. The property must be the homeowner’s primary residence and the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance. In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent and a combined loan-to-value ratio no greater than 115 percent. 

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.For more information on FHA Short Refinance option, read FHA’s mortgagee letter

POSTED FROM HUD.GOV September 7th 2010

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“The key point I’m making right now is the economy is moving in a positive direction, it’s just not moving as quickly as we’d like it,” Obama says as he offers a speech following the most recent Labor Reports.  Unemployment is now ticking upward to 9.6% Nationally which left an additional 54,000 american without jobs in August alone.

The $8000 Tax credit for first time home buyers has recently expired and we have little advancement to jolt our economy out of its downward spiral.  President Obama suggested little information regarding the new proposals, but said he was “confident Democrats and Republicans can come together to agree on steps to move the economy forward.”

The president is schedule to release his vision of the new stimulus plan this afternoon.  Analysts expect to see at least a $50 billion committment to economic growth.  New sources such as The Washington Post reported that the president is reviewing an extension of the research-and-development tax break, as well as a payroll tax holiday which will save businesses $300 billion.


Housing experts are hoping for a new home buying tax credit to stimulate the housing market.  With last month revealing the worst home sales data since 1963, a new home tax credit stimulus would be welcomed by all.

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When does the housing nightmare end?  When will house values start going up instead of down?  Those are two questions that are hard to answer.  One number that is chilling to read is the number of hard-working homeowners that are late on their mortgage payment.  3.51% of all homeowners are at least 30 days late at this point.  That number was reported as 3.31% at the end of last year taking into question governmental efforts to thwart foreclosures around the country.  Just when the first round of foreclosures was starting to settle down the next wave may be hitting the already hard hit housing recovery. 

This sudden incline in delinquencies may be a close reflection on the jobs market.  The number of unemployment claims continue to rise and one would expect the number of late payments to coinciding with these claims.  You can’t expect a total housing recovery until the jobs numbers start to recover.  The housing recovery or nightmare to some might just take longer than anyone originally thought…

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With the economy still in a questionable situation, Michigan appears to be rebounding at a faster pace than all other states.  New labor and employment data shows that the State of Michigan has gained 27,800 jobs in the month of July.  This means that there have been more Michigan jobs created than lost for 3 out of the 4 past months.

The unemployment rate has fallen from over 14.2% down to 13.1% over the past year.  These new jobs are not just from the state’s efforts to grow in new industries such as film and medical, but from an all too familiar place; the automotive manufacturing industry which is responsible for 20,000 of the 27,800 new jobs created.

With both General Motors and Chrysler recovering from their recent bankruptcies, they are now bringing workers back from layoffs and hiring new employees. This make you question if we have learned from out mistakes of the past by putting all our eggs in one basket and relying on a bloated industry to lead our economy. 

A faster recovery for Michigan is great in the short-term but how will it affect us in the long run?  Will the Automotive industry be sustainable years from now or will we end up with another destroyed economy if the industry falls out again in a few years?  This is not a question there is an easy answer to, but for us Michigan residents, lets hope the new job creation leads to a better future for our great state!

Anthony Bird
Director of Mortgage Lending
Riverbank Mortgage
http://riverbankfinance.com

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