Government “short refi” program ~ will it help Phoenix real estate market?

The government is initiating a “short refi” program beginning today, 9/7/2010, in an effort to help homeowners who owe more than their homes are worth.  Could this program bail out the real estate market in the Phoenix Metro area?

According to the August 6, 2010 HUD Mortgagee Newsletter, this program will “allow borrowers who are current with their loan payments to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lein mortgage by at least 10%”.

Once again, lender consent participation is voluntary, but FHA estimates this could save between 500,000 and 1.5 Million upside-down mortgages.

  • short refi programHomeowner must have negative equity, be current on the existing mortgage, and have a FICO score greater than or equal to 500
  • It must be for the homeowner’s primary residence
  • Existing loan can’t be FHA-insured
  • First lien holder must write off at least 10 percent of the unpaid principal balance
  • Refinanced mortgage must have a loan-to-value ratio (LTV) no greater than 97.75 percent
  • Second liens must be re-subordinated so the new loan does not exceed a combined LTV of 115 percent

The last item on the list could be a problem for homeowners with a second leinholder.

This sounds really good on paper…now let’s see how many lenders “volunteer” for the program.

Could this be the help homeowners have been waiting for? Color me hopeful.

About The Amy Jones Group

Mindy Jones Nevarez is the owner of Amy Jones Group Keller Williams Integrity First. The Amy Jones Real Estate Group has been recognized as the #1 Real Estate Team in Chandler by the Phoenix Business Journal and voted Best of Our Valley for 4 years.

The Amy Jones Group specializes in real estate in Chandler, Sun Lakes, Gilbert, Mesa, Tempe, Ahwatukee, and Phoenix.