FHA 105% To 125%Refinance Program Expand

HUD Secretary Shaun Donovan announced today the FHA Streamline Refinance program, known as the Making Home Affordable Plan, was expanding the guidelines to allow people to refinance their homes up to a 125% loan to value.

This means that people who were previously upside down in their mortgage by more than 105% of the value of their homes and could not refinance under the refinance plan can now refinance their homes as long as they do not owe more than 125%  of what their home is currently worth.

This change in guidelines is just one more thing being offered by the government to boost participation in anti-foreclosure programs.

Prior to today’s announcement, anyone who had a mortgage that was owned by either Fannie Mae or Freddie Mac could refinance their home under the refinance plan (or the Making Home Affordable Plan) as long as they did not owe an amount higher than 105% of the value of their home. Today's announcement expands that number to 125%.

With the severely declining market in Arizona, and in many other parts of the country for that matter, there are many people who currently owe more than 105% on their home and prior to today, they are unable to refinance. Now as long as they don’t owe more than 125% of what their home is now worth, they can take advantage of lower 30 year fixed  rates.

According to CNN:

The move acknowledges that home prices in many areas have fallen so far that many people were shut out of the program. Some 67% of homeowners in Las Vegas — one of the hardest hit areas where Housing Secretary Shaun Donovan announced the expansion Wednesday — owe more than their homes are worth.

More than one in five borrowers are now underwater, with homes in parts of California and Florida with Arizona close at hand losing more than 50% of their value, according to Zillow.com, a real estate Web site. Some 20 million people own homes worth less than their mortgages.

About 6.6 percent of conforming first loans have loan-to-value ratios above the new ceiling for the Home Affordable Refinance Program, compared to 16.6 percent under the program's old guidelines, according to an analysis by Zillow.

Zillow said that under the old 105 percent LTV ceiling, 14.6 million homeowners with mortgages might have qualified for the program. Raising the ceiling to 125 percent means another 5.6 million homeowners are potentially eligible for the program, Zillow said.

“The Making Home Affordable plan is already helping far more than any previous foreclosure initiative and with today’s announcement we will extend its reach still further,” said Donovan.

According to Bloomberg:

The decision to change the allowable ratio is part of an effort to “adapt to an ever-changing housing market,” Treasury Secretary Timothy Geithner said in the HUD statement. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly.”

Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia, said mortgage brokers have told him that many are not sending borrowers through the program because the program is cumbersome and the loan applications “still have a lot of bells and whistles, which makes the loans difficult to do.”

“I don’t think it is going to have much of an impact because you still do not have enough qualified borrowers,” Miller said, referring to today’s announcement. “It will help on the margin, but the issues with these plans is that they all focus on affordability and not principal writedowns and at some point they’re going to have to address” that, he said.

A drop in values has left about 20.4 million of the U.S.’s 93 million houses, condos and co-ops with mortgages higher than the properties are worth as of March 31, Seattle-based real estate data service Zillow.com said in a report May 6.

My Thoughts:

This program will work well for those that qualify and use it.  However, a large number of  Arizona's homeowners are still getting their professional mortgage advice from slanted news articles, neighbors, or water-cooler experts instead of seeing a knowledgeable and experienced expert in the market place.  The best way to know what ALL YOUR OPTIONS are, is to call for Korene or to fill out an application on this website today.  It is FREE TO FIND OUT. I don’t know how much of an impact this expansion will have across the nation - but here in Arizona and in other states in the Southwestern USA where so many homeowners are upside down in their mortgage compared to the value of their home, you will receive a complete, professional, personalized analysis with which to make your financial decisions and apply for your re-finance loan, if your home qualifies. 

I am available to answer any questions regarding your home’s value.  I see this as having a significant impact to those that will avail themself of the opportunity and obtain the FREE MORTGAGE TUNE-UP.  I am sure there will be plenty of questions so feel free to email, send me an instant mobile message (upper right hand corner), chat online with the team (left hand side under my photo), or call me at for Korene with any questions and to set up an appointment.

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Today's Rates

Mtg Loan Rate APR
30-yr Fixed 3.89% 4.02%
15-yr Fixed 3.16% 3.33%
1-yr Adj 2.74% 3.4%
* national averages
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