FHA is developing a refinance program for those with mortgages that are underwater (the mortgage amount exceeds the value of the home). This option will be made available to homeowners with mortgages that are not currently insured by the FHA. If you have an FHA mortgage, you will not be eligible for the program.
Here's how the program is expected to work: Lenders who participate in the program must agree to write down at least 10% of the principal balance of the original first mortgage. A new appraisal must be obtained to determine the current market value of the home. After the principal write down, the new loan to value can be no higher than 97.75% of the new appraised value.
If you have a second mortgage, the lien holder must agree to subordinate their second mortgage to the new first mortgage, and must agree to write off any principal amount that exceeds 115% of current loan-to-value (LTV).
The program is voluntary for the mortgage lenders. That means that not all lenders will participate in the program, and that means you might not be able to refinance your mortgage with FHA.
The program is expected to implemented sometime in the fall of 2010.... more