FHA Loan Modification

The United States Department of Housing and Urban Development (HUD) Secretary Shaun Donovan has mad an announcement that  the Federal Housing Administration (FHA) has made some moves to change up the loan modification program to be sure it is in line with the President Obama, Home Affordable Modification Program (HAMP). On August 15, 2009, the Federal Housing Administration (FHA) borrowers will have the ability to modify their loans and significantly lower their the monthly mortgage payments. It does not matter who the lender or servicer if there is a FHA-Home Affordable Modification Program (FHA-HAMP) Loan Modification.

This is a very important process to help homeowners struggling and really want to keep their homes from foreclosure. Borrowers with FHA loans will have the ability to have their home loans modified by taking advantage of the Obama Administration’s Making Home Affordable program. There was an announcement that the Home Affordable Refinance Program that borrowers that are up to 125 % upside down on their mortgage will be able to use this new loan modification program.

The Helping Families Save Their Homes Act of 2009, signed into law on May 20, allows FHA to give qualified FHA-insured borrowers the opportunity to reduce their monthly mortgage payment by modifying the mortgage through FHA-HAMP.

FHA expects all servicers to implement the changes by August 15. The program permanently reduces a family’s monthly mortgage payment through the use of a partial claim, which defers the repayment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off.

FHA has used the partial claim option in the past, which allows a lender to advance funds on behalf of a borrower, to reinstate a delinquent loan that was up to 12 months delinquent. Now, this program will allow HUD to bring the borrower’s payment down to an affordable level. This will be accomplished by bringing the mortgage current, buying down the loan by up to 30% of the unpaid principal balance and deferring these amounts in a partial claim.

FHA will pay an incentive to loan servicers for each FHA loan modified under this program. A Mortgagee Letter, along with detailed requirements for the FHA-Home Affordable Modification Program, was recently distributed to all FHA lenders. The implementation of this program will further the Obama Administration’s efforts to stabilize the housing market by helping homeowners to stay current on their mortgages and stay in their homes, therefore preventing the destructive impact of foreclosures on families and communities.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Obama Administration on February 18. More than 200,000 trial loan modifications are already underway, tens of thousands of refinancings have closed, and informational mailings about the program have been sent to more than one million borrowers who may be eligible.

Filed under: FHA Hope for Homeowners, FHA-Home Affordable Modification Program | FHA Loan Modification, FHA-Home Affordable Modification Program|No Comments