The U.S. Department of Housing and Urban Development Secretary Shaun Donovan announced that the Federal Housing Administration (FHA) loans will, as of August 15, be eligible for the Making Home Affordable Modification program.
The refinancing portion of the Obama program was recently revamped in order to help more homeowners refinance even if they owe more than their homes are worth.
Qualified FHA-insured borrowers will be able to modify their loans to a permanently reduced monthly payment through the use of a "partial claim, which defers the reapyment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off."
The program will bring the borrower up-to-date on their loan payments, buy down the loan by up to 30% of the unpaid mortgage balance and defer these amounts in a partial claim.
FHA-insured loan customers can call 888/297-865 to determine if they qualify for the FHA-Home Affordable Modification Program.
Before signing on, these borrowers should be sure they understand that this "partial claim" will need to be repaid when they sell the home or refinance the mortgage or pay off the first mortgage. This may be a good solution to current financial problems but it could be a problem in future years, particularly if the home value does not rise significantly.
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