If you’re one of the millions of Americans that has fallen behind on their mortgage, then you may be interested in learning a little more about the FHA Secure Loan Program.
The FHA Secure Loan Program is an initiative by the Bush administration in direct response to the many homeowners who have fallen behind on their mortgage payments, and goes hand-in-hand with proposed government laws designed to curtail bad mortgage practices.
Why have so many people fallen behind on their mortgage payments? Well, several years ago the mortgage industry promoted low-interest adjustable rate mortgages. They awarded loans based on borrowers’ current income and whether they could support the lower interest rates, without taking into consideration that these same borrowers might not be able to afford their payments when interest rates increased. As these mortgages mature and their interest rates rise, many homeowners are finding themselves in over their heads.
The FHA Secure Loan Program is designed to help any borrower who is at risk of foreclosure due to an adjustable rate mortgage. The loan works by allowing borrowers to refinance their adjustable rate mortgage into a fixed rate mortgage, and is ideal for people who have fallen behind as it allows six months of past due mortgage to be rolled into the loan amount. Back taxes and insurance are also allowed to be included in the new loan balance.
Because the FHA Secure Loan Program is designed specifically for adjustable rate mortgage buyers, borrowers must prove that the reason why they have fallen behind in their mortgage payments is because of increasing interest rates, and not because of financial responsibility. Borrowers who show good payment history prior to their adjustable rate mortgages maturing, and poor payment history after interest rates rise, are generally good candidates.
The FHA Secure Loan Program does not allow borrowers to take cash out. Standard FHA guidelines are used when the loan is underwritten. These guidelines ensure that the borrower has the ability to pay the new mortgage note, and also requires that both home owner’s insurance and property taxes are escrowed. Depending upon the risk factor of the borrower, the FHA is allowed to adjust the mortgage insurance premiums on each specific loan. Allowing the insurance to be adjusted means that more homeowners can qualify for the loan, which means that more homes are saved from foreclosure.
The new program allows homeowners to refinance up to 97.75% of their home’s current appraised value. This particular loan, however, doesn’t work for borrowers who have homes that have depreciated in value since the original mortgage note.
The FHA Secure Loan Program is not only designed to help single-family homeowners, it can also help owners of multi-family homes and manufactured homes avoid foreclosure.
