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Help for Homeowners with FHA Loans

GeorgetteMillerLaw.com > Practice Areas  > Loan Modification Lawyers > Help for Homeowners with FHA Loans

Borrowers who are facing foreclosure and who have loans guaranteed by the Federal Housing Administration, or FHA, have several options available to them. Borrowers may be able to take advantage of the FHA Home Affordable Modification Program, the FHA Second Lien program or the Special Forbearance for Unemployed Homeowners program if they are having difficulty with making their mortgage payments.

FHA Home Affordable Modification Program, or FHA-HAMP

A part of the Making Home Affordable program, FHA-HAMP helps FHA-insured homeowners who meet the requirements under HAMP to avoid foreclosure. This program permanently reduces the mortgage payments by using a loan modification combined with a partial claim. Partial claims are interest-free Housing and Urban Development loans that do not have to be paid until the borrower either pays off his or her first mortgage or no longer has the property.

The program works by using partial claims to do the following:

  • Reinstate loans that are up to 12 months behind
  • Buys up to 30 percent of the unpaid first mortgage principal balance on the date of default

Combining the partial claim with a loan modification can thus help people who have FHA-insured mortgages to avoid foreclosure while also reducing their monthly payments.

The trial payment period of FHA-HAMP

Eligibility for FHA-HAMP requires that the homeowner successfully finishes a trial payment period. During this time, the payments must be paid on time in the amount as what the modified mortgage payments will be. If the homeowner does not complete the trial period successfully, he or she will not be eligible for relief through FHA-HAMP.

FHA Special Forbearance for Unemployed Homeowners

People who are unemployed and who have FHA-insured loans may be able to take advantage of a 12-month forbearance during which their monthly payments will be reduced. The forbearance period may be terminated if any of the following happens:

  • The homeowner abandons the home
  • The homeowner tells the servicer that he or she has stopped looking for employment
  • The homeowner tells the servicer that he or she does not intend to abide by the forbearance agreement terms
  • The homeowner is behind by 60 days on his or her forbearance payments
  • The homeowner finds work and has his or her loan reinstated

After a borrower finishes his or her forbearance period, the servicer must then evaluate whether or not the borrow may be eligible for further assistance. If he or she does not, the servicer is required to notify the homeowner in writing, giving a reason for being denied. The borrower must then be given seven days to submit additional documentation that might change his or her results. All loan servicers that are approved by the FHA must participate in the agency’s loss mitigation program.

The FHA Second Lien Program, or FHA2LP

If a borrower is allowed to participate in an FHA short refinance by the servicer of the first mortgage, he or she may be eligible for an elimination or reduction of a second mortgage on the property through the FHA Second Lien Program, or FHA2LP. Through this, the total mortgage debt following the refinance may not be greater than 115 percent of the home’s market value.

In order to qualify, people must meet all of the following requirements:

  • The first mortgage servicer must agree to an FHA short refinance
  • The mortgage must have been originated before Jan. 1, 2009
  • The borrower may not have been convicted of a real estate transaction or mortgage-related felony theft, fraud, larceny, money laundering, forgery or tax evasion within the past 10 years.

Options That Are Available For Non-FHA Loans

People who owe more on their homes than they are worth and who would like to get terms that are more favorable may want to think about applying for an FHA short refinance. This may reduce the amount that is owed on their first mortgages to no more than 97.75 percent of the home’s value. In order to qualify for the program, all of the following requirements must be met:

  • The mortgage is one that is not insured by the FHA
  • The borrower must owe more than what the home is worth
  • The borrower must be current on his or her mortgage payments
  • The borrower must live in the home as his or her primary residence
  • The borrower must be eligible under the FHA underwriting requirements
  • The payment cannot be more than 31 percent of the borrower’s gross monthly income
  • The borrower’s FICO score must be equal to or greater than 500
  • The borrower may not have a real estate or mortgage-related felony conviction during the previous 10 years for tax evasion, theft, larceny, forgery, fraud or money laundering.

Contact Our Attorneys

In order to learn more about the options that are available for homeowners, schedule your free appointment by calling 1-866-964-6529.