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What HUD Told Lenders About FHASecure

by Peter G. Miller
January 20th, 2008

According to HUD’s own mortgagee letter, the basic FHA mortgage instruction it provides to lenders, the purpose of the FHASecure program could not be more clear.

*”This mortgagee letter describes how lenders and homeowners may refinance mortgages that, due to the increased mortgage payment following the reset, have become delinquent.”

*”This mortgagee letter extends eligibility to borrowers who became delinquent under their current mortgage following the reset of the interest rate.”

*”These instructions are designed to permit homeowners, who previous to their reset, demonstrated an ability to meet their mortgage obligations, an opportunity to refinance into a prime-rate FHA-insured mortgage.”

HUD says there has been “confusion” regarding the purpose of the FHASecure program. However — despite what HUD now says – the FHASecure program was NOT designed for all conventional borrowers. The program was specifically developed for delinquent conventional borrowers as part of the President’s announced effort to fight the foreclosure epidemic.

HUD’s claim that “the term FHASecure applies to all conventional to FHA refinance transactions” is absurd. Saying that every conventional borrower who refinances with an FHA mortgage is within the FHASecure program — and thus “showing” the success of the FHASecure program — merely hides the true story: Just a few hundred delinquent conventional borrowers per month have been helped with FHASecure loans.

Source: Mortgagee Letter 7-11: The FHASecure Initiative and Guidance on Appraisal Practices in Declining Markets

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