In some cases, the FHASecure Initiative may allow secondary financing to remain in place behind the first mortgage. This would allow the total mortgage amount to fall above the FHA loan limit. The combined loan to value can exceed 100% if qualified.
FHASecure will bring stability to the housing market and give eligible families, who were in good financial standing before their loans reset, a chance to keep their homes. FHASecure expands the number of borrowers eligible for FHA-guaranteed loans to include homeowners in default.
One of the eligibility requirement for FHA-Secure is that the homeowner must not have late payment history on the current loan prior to the interest rate resetting.
One of the main benefits of the FHASecure Initiative is that consumers who have fallen behind since their rate has adjusted are not immediately disqualified for financing. As long as your payments were up to date prior to your adjustment period, you may qualify for financing under the FHAsecure Initiative.
The president did mention that it is not a "bailout" for lenders or Real Estate speculators. Instead, he said, the government has a role to play in helping American homeowners "get through this difficult time." FHA Secure is a temporary program, however, and it is set to end by the end of calendar year 2008.
According to the FHA mortgagee letter that spells out the requirements for the refi program, borrowers that were current on their monthly payments up to the time of the reset of their ARM can qualify for a new FHA-insured mortgage.
FHA will also implement risk-based premiums that match the borrower's credit history with the insurance premium they pay. This common-sense, risk-based pricing structure will begin on January 1, 2008. Under the this new mortgage insurance, riskier borrowers will pay more in premium.
According to the Department of Housing and Urban Development, the risk-based insurance premium structure will further expand FHA's reach to additional underserved borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into exotic mortgages, and enhance the FHA's overall risk management. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.
FHA secure will allow home owners to refinance 97.75% of the appraised value of their homes value. How ever FHA secure does not allow for cash out refinances.
FHASecure Initiative announced by Bush allows homeowners with non-FHA ARM loans that will reset between 6/2005 and 12/2009 eligible for and FHA-insured loan.
However, some mortgage professionals have criticized that the FHA maximum allowable loan size limits are too small to be helpful in high home price areas in the country. These critics believe Congress should raise these loan limits as requested in the FHA modernization proposal. Even then, however, this program may not meet the needs of homeowners in very high home cost areas like most of California and New York.
Some also suggest that risk-based mortgage insurance premiums (MIP) can be expensive for strapped borrowers. The cost of MIP was one reason why FHA had fallen out of popularity in the past decade. In the past 10 years, many homebuyers had turned to conventional "combo" loans, which combine a first and second mortgage to avoid the high premium cost of MIP or private mortgage insurance (PMI).
The following 5 criteria have to be met in order to be eligible:
1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2008;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment.