FHA Secure Plan Explained

In response to the mortgage and credit crisis of 2007, President Bush has proposed a new set of loan programs and guidelines to help at-risk mortgage holders. The FHASecure (Federal Housing Administration, Department of Housing and Urban Development) program is designed to provide borrowers with strong credit histories (and higher FICO scores) with the ability to qualify and secure new mortgages should conditions (in the market, for instance) otherwise prevent it.

At the tail-end of the real estate boom (starting 3-years ago), millions of Americans purchased property on speculation (usually 2nd homes and/or rental properties) figuring to profit on quick resales. While these *better* borrowers have been making timely mortgage payments, the interest rates on their mortgages are due to adjust, meaning they will soon have difficulty making the new, inflated payments.

From here, it looks as if the FHA will scale-up their implementation of risk-based premiums, so that each new FHA Secure mortgage accurately reflects the borrower's individual credit history. In other words, riskier borrowers will still pay more.

The FHA pricing structure is slated roll out in January, 2008.

In the interest of full disclosure, I am a mortgage broker and am qualified to close FHASecure refinance transactions. That we know of, we are the only lender getting referrals from HUD. FHA is not a credit score driven loan. FHASecure has other caveats allowing people with bad credit to refinance into a better situation.

There are several facets of the program which are just now coming out. It's true that FHASecure allows borrowers who are in an ARM to refinance if the adjustment occurs between June 2005 and December 2009. If you owe more money on a home than it is worth, you can still refinance with FHASecure. FHA will allow a lender to hold a second behind an FHA loan with no restrictions on Combined Loan to Value. This will allow lenders holding bad paper to short pay some of the debt, but get repaid most of the debt through the refinance. All homeowners have to do is negotiate with their current lien holder who should be more than happy to entertain this type of transaction.