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FHA Short Refinance Program Enhancements

Earlier in 2012, the FHA announced some changes to its FHA Short Refinance program, which was originally announced in 2010 in a Mortgagee Letter titled ” FHA Refinance of Borrowers in Negative Equity Positions”.

This program, also known as the FHA Short Refinance, is designed to allow “responsible homeowners with negative equity an opportunity to refinance their homes. These enhancements were designed to maintain homeownership by providing borrowers with conventional loans, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan.”

“This opportunity allows only non-FHA insured loans to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10 percent.”

The changes to the FHA Short Refinance Program include an extension of its availability to December 31, 2014. Additionally, this year’s changes allow “borrowers who may have been delinquent on their existing loan, but who have successfully completed a trial payment plan that meets the following standards to be eligible for the program.”

That is an important change. Borrowers who qualify under such circumstances should know what else the FHA says about the trial payment program requirement. “The trial payment plan must require a payment amount which is consistent with the amount the borrower would pay if they were to refinance the mortgage under the FHA Short Refinance. If the borrower can make three consecutive on-time monthly payments successfully, they are now eligible for a FHA Short Refinance loan.”

FHA says if the borrower “successfully makes three consecutive on-time monthly payments during the trial plan, the Mortgagor is eligible for a permanent loan under FHA

Joe Wallace - Staff Writer

By Joe Wallace

November 6, 2012

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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