FHA Secure Plan - What does this mean?

President Bush has come up with a plan that has passed through the house that intends to help provide some outlet to homeowners in specific struggling situations. The specific people that this will affect are the homeowners who are in a mortgage that has an adjustable rate, that has most likely adjusted or will adjust higher than they can afford.

This unfortunately has become a grim realty in the world of home financing. You see the news of all the all foreclosures, you see the subprime lenders going out of business, and you see the big "players" struggling and shifting their tactics. Homeowners were suggested into these types of loans, often times stretching their budget at the time beyond necessity. Unfortunately, many of these homebuyers were put into "subprime" mortgages which are usually 2-3 year ARM's, with an adjustment after that period that could significantly increase their payment. Credit standards became looser and looser, people that bought homes, most likely should not have. Right now, you are seeing the affects of this snow ball as it crashes through the housing market.

The FHA Secure Plan is intended to relieve some of these homeowners that have had trouble keeping up with their adjusted payment. The intitial look at this program tells me that the homeowner should have a clean mortgage and recurring debt history at least 6 months prior to the reset. If they are delinquent only after the reset, they would be a prime candidate for this program. Normally, you are to have at the most a 97.75% loan to value to refinance into an FHA mortgage, but it looks as though there will be added stipulations to this program to basically allow the current mortgagee to write off some of the mortgage owed to them if there is not sufficient equity in the home. In addition, FHA will adjust their risk based pricing premium in regards to mortgage insurance. This used be a standard premium, but beginning January 1, 2008, this will adjusted according to the borrower's risk profile. It also seems that this program will be applicable to borrowers whose adjustments are to occur in between June 2005 and December 2009.

Feel free to send an email if you want any further information.

Thanks,
Dan