Annette West recently published this interesting article on FHASecure over at the Las Cruces Sun-News:
FHA is a quasi-private agency regulated by the government whose purpose is to help low and moderate income Americans become homeowners. FHA does not make loans — it works with lenders to make it easier for you to get a loan.
The FHA has several popular programs. Using the 203(b) mortgage insurance program, you need only make a 3 percent down payment — instead of 20 percent — to purchase or refinance an owner-occupied residence.
What’s the catch?
You have to pay an upfront mortgage insurance premium of 1.5 percent of the original loan amount, which may be included in the loan amount. You also pay a monthly mortgage insurance premium of 0.5 percent of the original loan amount. You do that until you have a 78 percent loan-to-value ratio, or have built 22 percent equity in the property.
Now the FHA is adding a new refinancing program called FHASecure. Designed for people with good credit scores who have been paying their mortgage on time, the program is to help borrowers refinance their mortgage. This is expected to help an estimated 240,000 families avoid foreclosure.
Again, we ask, what’s the catch?
Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA’s insurance fund at no cost to the taxpayer. FHA will implement risk-based premiums that match the borrower’s credit profile with the insurance premium they pay, meaning that riskier borrowers pay more. This pricing structure will begin on Jan. 1.
To qualify, the homeowner must show:
1. A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset.
2. That their mortgage interest rates have, or will, reset between June 2005 and December 2009.
3. A 3-percent cash or equity in the home or more.
4. A sustained history of employment.
5. Sufficient income to make the new mortgage payment.
“FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates,” said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery.
“These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer.”
