President Bush announced Friday a new FHA refinance program named FHASecure.
The program is an Federal effort to help ARM adjusting consumers avoid payment-shock related foreclosure.
Under the terms of the program borrowers seeking to refinance into a fixed rate mortgage under the program must:
-Obtain a new appraisal, and demonstrate 3% equity in the home
-Demonstrate they have the ability to repay the loan
-Interest rate must have or will reset between June 2005 and December 2009.
It offers bruised borrowers the benefits of:
-No minimum credit score required.
-Existing late payments can be rolled into the new loan, as long as there exists 3% equity in the home.
In related efforts, Bush announced :
-He has asked Congress to remove the tax penalty for borrowers who are able to negotiate forgiveness (often part of a short sale) as part of their mortgage debt.
-He has asked congress to pass an FHA overhaul bill which would allow the administration to expand risk-based pricing, reduce down-payment requirements on loans it guarantees, and raise loan limits in high-cost states like California and New York from $363,000 to $417,000.
I doubt the FHA secure program will stop the foreclosure situation at all. The real problem occuring in the market are home values have declined substantially across America. And so many borrowers purchased their homes with an adjustable rate feature, with little down payment. So many of these homeowners are upside down, with negative equity, and a higher adjusting mortgage payment. Foreclosures will continue to rise.
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