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The Making Home Affordable program is expending to allow "short refinancing" to FHA loans for eligible homeowners. This program is intended to assist homeowners with refinancing mortgage loans in excess of their homes' current value.

What is an FHA Short Refinance?

FHA and the Making Home Affordable programs are working together to provide relief for homeowners saddled with mortgage balances higher than their homes' value. This relief option will provide FHA refinance mortgages and is expected to start this fall. Here are the general criteria for eligibility; more details will be released through a HUD Mortgagee Letter at a future date.

Eligibility for Existing Mortgages:

Participation in this program is voluntary for homeowners and their mortgage lenders; although you may qualify under HAMP eligibility criteria, your mortgage lender is not required to participate.

  • FHA and non-FHA mortgages may be refinanced under this program.
  • Homeowners must occupy the mortgaged home.
  • Payments on the existing mortgage must be current.
  • The mortgage lender must be willing to reduce the existing mortgage balance by at least 10%.
  • Mortgage amounts forgiven will be reported to credit bureaus.

Criteria for FHA Refinance Mortgages

  • Homeowners must meet minimum credit score and document income according to FHA guidelines.
  • The new FHA refinance mortgage cannot exceed 97.75% of current home value.
  • Combined loan-to-value (CLTV) including second mortgages may not exceed 115%.
  • Home equity lenders must agree to write down and re-subordinate their liens to achieve the maximum CLTV of 115%.
  • The new FHA mortgage will be provided at current FHA mortgage rates.

Refinance Program Designed to Reduce Foreclosure Losses, Provide Homeowners Relief

Although this program is intended to benefit both homeowners and mortgage lenders, there is no requirement for mortgage lenders or home equity lenders to participate. They may not agree to reducing their loan balances or other program requirements.

If your home is worth less than you owe, consulting a HUD-approved housing counselor can help you prepare for establishing eligibility under this new refinance opportunity.

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.