The Housing Rescue Bill and the FHA Refinance Loan

On October 1, 2008, new FHA Refinance Loan5 years.
Guidelines will go into effect as part of The HousingNote: The FHA requires a 3% Exit Fee of the
and Economic Recovery Act of 2008. This new FHAMortgage Principal Balance when the borrower sells or
Mortgage program is designed to help thousands ofrefinances the home again.
homeowners who are at risk of foreclosure in their3. Other Requirements
current conventional or sub-prime home loans.Existing Subordinate Liens
The details of The "HOPE for Homeowners Act ofBefore participating in this program, all subordinate liens
2008" are as follows:(such as second loans, home equity loans, etc.) must
1. Eligible Borrowersbe extinguished. This will have to be done through
Only owner-occupants who are unable to afford theirnegotiation with the first lien holder.
mortgage payments are eligible for the program. NoMortgage Insurance and Other Fees
investors or investor properties will qualify.The Up Front FHA Mortgage Insurance Premium that
Homeowners must certify, under penalty of law, thatis required on all FHA Refinance Loans will change as
they have not intentionally defaulted on their loan topart The Housing and Economic Recovery Act of
qualify for the program and must have a mortgage2008. The Monthly MI Rates have also been updated.
debt-to-income ratio greater than 31% as of March 1,The following FHA MI rates will begin on October 1,
2008. Lenders must document and verify borrowers'2008 and will be effective for 12 months;
income with the IRS.FHA Up Front MIP - Required on all FHA Loans (Can
2. Home Equity & Appreciation Sharingbe financed into loan amount).
In order to avoid a windfall to the borrower created by1.75% - Normal FHA 203(b) Refinance 1.5% - FHA
the new 90% loan-to-value FHA-insured mortgage, theStreamlined Refinance 3.0% - FHASecure (Refinance
borrower must share the newly-created equity andfor high risk borrowers who are already delinquent on
future appreciation equally with FHA. This obligation willcurrent mortgage)
continue until the borrower sells the home orMonthly MI - Multiply the loan amount by the figure
refinances the FHA-insured mortgage. Moreover, thebelow and then divide by 12. The result is your Monthly
homeowner's access to the newly created equity willMortgage Insurance.
be phased-in over a 5 year period.30 Year Note 0.55% - Refinance greater than 90% of
The borrower agrees to repay the following share ofthe home's LTV. 0.50% - Refinance less than or equal
any home equity appreciation with the FHA when theto 90% of the home's LTV.
home is sold or refinanced again;15 Year Note 0.25% - Refinance greater than 90% of
A. 100% of any equity earned is paid to thethe home's LTV. Monthly MI is not required on an 15
government FHA if the home sells or the borrowerYear FHA Refinance Loan with an LTV of 90% or
refinances within 1 year.less.
B. 90% of any equity earned is paid to the FHA if theThe FHA Refinance Loan Process
home sells or the borrower refinances within 2 years.Each new loan will be originated and underwritten on a
C. 80% of any positive equity earned is paid to thecase-by-case basis. To get approved, your income
FHA if the home sells or the borrower refinancesstatements, bank accounts, credit scores and work
within 3 years.history will be examined. A new appraisal must be
D. 70% of any positive equity earned is paid to theperformed on your home to determine its current
FHA if the home sells or the borrower refinancesvalue.
within 4 years.If it doesn't have positive equity, then you must contact
E. 60% of any positive equity earned is paid to theyour current lender and negotiate with them to reduce
FHA if the home sells or the borrower refinances(write down) your current mortgage to 90% of its
within 5 years.current appraised value. If your current lender agrees
F. 50% of any positive equity earned is paid to theto the write down, then you will be able to proceed
FHA if the home sells or the borrower refinances afterwith the FHA refinance.