Pros and Cons of the extended FHASecure Program

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The FHASecure program began September 5, 2007 allowing borrowers with non-FHA ARM mortgages to refinance their loan into an existing FHA program. It was expanded this July 14, 2008. Below are the some of the revisions and the pros and cons of the new program.

OLD

1) There is no limit on how far behind you can be on your mortgage or how many payments you’ve missed as long as you have sufficient equity .

2) Interest-Only fixed rate mortgages are NOT eligible.

3) The borrower must be delinquent on a non-FHA to ARM that has recently reset.

4) The borrower’s ARM mortgage must have already reset and must have been making payments on time for up to 6 months prior to reset or delinquent payments.

5) Non-FHA payment option ARMs are NOT eligible.

NEW

1) There is a maximum of 3 months delinquency in a 12 month period with at least 10% equity.

2) Interest-Only fixed rate mortgages ARE eligible as long as the borrower’s mortgage is current or delinquent due to payment shock of an interest rate increase.

3) The borrower does not have to be delinquent to qualify. FHA encourages borrowers to refinance before they fall behind on their mortgage.

4) The borrower does not have to be delinquent or have had their payment reset in order to qualify.

5) Non-FHA payment option ARMs ARE eligible.

Advantage of expanded FHASecure program

1) Extends help for more struggling homeowners (include those with non-FHA subprime ARMs) who are on the verge of foreclosure.

2) Increases options for delinquent homeowners who have had at least 3 delinquencies in the past 12 months.

3) It increases help for struggling homeowners without affecting taxpayers.

4) Extends help for homeowners who have mortgages that are more than their property is worth.

5) Charged premiums can give borrowers an incentive to improve their credit by charging them lower premiums depending on their credit status.

6) FHA insurance under program gives subprime borrowers access to lower rates, which can provide a lower mortgage payment.

Disadvantage of expanded FHASecure program

1) A large majority of struggling homeowners also have a lack of equity issue. FHASecure has a maximum limit. Programs states to have lender carry 2nd mortgage if this occurs. Overall payment may not help borrowers.

2) Taxpayers do not have to pay for this program. However, borrower does with mortgage insurance premiums that can range from .55 percent to 2.25 percent.