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New Refinance Option for Troubled Crofton Homeowners

Sign Short Sale Image ChefTroubled Crofton area homeowners who prefer to stay in their own home may have another option now besides short sale or foreclosure.  They may be eligible for the FHA “short refinance” – even if they owe more on their current loan than the home is worth… and even though their current financing is not an FHA loan. 
Rather than try to interpret this program for you, let me provide you the following excerpts from HUD #10–173, dated August 6, 2010:
Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers (who are current on their existing mortgage and whose lenders 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 will help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will offer a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

Participation in FHA’s 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 and have a credit score equal to or greater than 500. 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, bringing that borrower’s combined loan-to-value ratio to no greater than 115%.

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. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

The U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens, provided loan-servicers 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.

This is a VERY small window (expires October 3) for the loan-servicer to submit the required letter, and there’s no guarantee this deadline will be extended.  In other words, you need to act now, this week, if you’re interested. 

In the event you don’t already have an FHA mortgage lender to help you with this, send an email to me at [email protected] and I’ll provide you names and contact information for Crofton area lenders that my clients have worked with in the past year.


For answers to your real estate questions about Bowie, Crofton, Davidsonville, Fort Meade, Gambrills, Odenton and other communities in Anne Arundel County or nearby Prince George’s/Howard Counties, Maryland, contact Margaret Woda at Long & Foster.  If you prefer, simply click on a button below for information you can review online at your own pace.  

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