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Homeowners concerned about economic conditions and low home equity may benefit from refinancing their mortgages through FHA insured home loan programs.

Unemployment Blamed for Surge in FHA Mortgage Loan Defaults

The Mortgage Bankers Association released figures today indicating that unemployment is negatively impacting FHA home loans, as delinquency and foreclosure rates have reached record rates. With 1/6th of FHA-insured mortgages at least 30 days late, and 3.32% in foreclosure, FHA homeowners are facing the highest delinquency rates since 1979. October's unemployment rate of 10.2% is believed to be a major factor affecting mortgage defaults.

Benefit from Low Mortgage Rates

Mortgage lenders can't help you keep your home if you have no income. Homeowners can minimize their chance of problems by lowering expenses, including reducing mortgage payments by refinancing to a lower mortgage rate. FHA loans can help in the following ways:

  • Lower home equity requirements: FHA offers refinancing with less home equity than conventional home loans; typically you can refinance up to 85% of your home's value without additional penalties. This can be helpful for homeowners who've lost significant home equity due to falling home values.
  • Higher debt to income ratios: FHA allows debt-to-income ratios of up to 43%. This means that if you've lost some income, you may qualify for an FHA-insured refinance mortgage.
  • Stabilize adjustable mortgage rates and loan terms with a fixed rate mortgage: FHA's lenient credit and down payment / equity requirements provide opportunities for getting a fixed rate mortgage loan.
  • FHA streamline refinance program: If you already have an FHA mortgage and wish to refinance it to a lower rate, your may qualify through FHA's streamline refinance program. Cash-out refinance transactions are not eligible for streamline refinancing.

If you're at risk of losing your home to foreclosure, please contact a HUD approved housing counselor in your area.


Karen Lawson
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.