Wednesday, February 13, 2008

Is Your Arm Adjusting and Your Mortgage Going Through the Roof? – FHA to the Rescue!

ARM Loans and foreclosures seem to be the news of the day. This is a very real problem and thankfully the FHA has come up with a temporary program known as “The FHA Secure Initiative,” that may give some relief.

A gentleman called me the other day about what he could do about his adjustable rate mortgage (ARM) that would soon be adjusting or in plain talk, reflecting a significant payment increase. Like so many homeowners, he did not anticipate the tightening of underwriting requirements and being stuck with his dramatic mortgage payment reset he couldn’t possibly afford.(go to the articles section of for more information on ARM loans). Most of us sweat when we go to the grocery store and find out we spent $250.00 on groceries instead of our budgeted $150.00. Facing a huge jump in our mortgage payment would give a large majority of us heart palpitations! This situation is difficult for those with ARM loans about to reset. To make matters worse, many of these homeowners are boxed out of conventional financing because of recent, more stringent underwriting guidelines imposed.

What can be done?

The Federal Housing Administration (FHA) has released a new initiative which enables homeowners to refinance their mortgage when faced with adjusting mortgages that they can no longer afford. The program, known as “The FHASecure Initiative,” is a temporary program, and applications must be signed no later than December 31, 2008. I am going to repeat this point because it is important. An application must be signed no later than December 31, 2008. If you even think this program is something you should consider, do your homework now. Get a mortgage specialist to help you through the details of where you are today, what could happen tomorrow and what you can expect from this FHASecure Initiative program. If you do not have a mortgage specialist go to your bank, ask a friend or realtor for a name of a mortgage specialist, or call me.

The FHASecure Initiative allows lenders and homeowners to refinance mortgages which may result in delinquency once the loan is reset, or in some special circumstances, even if the loan has already become delinquent.

The mortgages in question must involve non-FHA adjustable rate mortgages where the homeowner’s mortgage payment history during the 6 months prior to the reset showed no instances of late payments. If there is sufficient equity in the home, with some further strings attached, you may be able to refinance even if you’re currently behind in payments. The lender must prove that with an FHA refinance, the borrower has enough income and reserves to make payments under FHA’s guidelines. Still confused? Contact a mortgage specialist to help you sort through these guidelines as they apply to your situation. Remember, asking the questions is simply educating yourself and will not obligate you in anyway. It’s about protecting your hard earned investment and safeguarding your credit history.

In the East Tennessee market, FHA will loan money based upon 98.75% of the appraiser’s estimate of value. As well, the maximum mortgage amount allowed for a single family home in our market is $200,160 (higher for multi-family dwellings up to four units). There is no income limit for this product, and individuals with credit scores below 620 may qualify for financing. FHA will allow you to roll the first lien, and second mortgage used to purchase the home originally, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges. In a nutshell, it is a fairly flexible product that might be just what the doctor ordered for some of us.

In summary, this product is an excellent solution for many of those subprime mortgages or ARM products we’ve heard so much about on the news. Hopefully, if you are one of those borrowers, this article can open a door for you were afraid was about to slam shut! Oh, and by the way, did I mention that the FHA Secure Initiative is a temporary program, and applications must be signed no later than December 31, 2008?

Please email your home loan financing questions to Kristin Abouelata, Mortgage Specialist, at Kristin will try to answer all questions on her website Some questions and answers may be published with future articles.

1 comment:

Jessica said...

Those who took the bait are in for a nasty surprise. While many Americans have started to worry about falling home prices, borrowers who jumped into so-called option ARM loans have another, more urgent problem: payments that are about to skyrocket. The option adjustable rate mortgage (ARM) as well as bad credit mortgage might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets.