How to avoid foreclosure by refinancing to an FHA-insured loan

The HOPE for Homeowners Act of 2008, passed in July, is expected to help 400,000 homeowners avoid foreclosure by refinancing their home mortgage to a FHA (Federal Housing Administration) insured loan. If you need foreclosure help and need to refinance your home mortgage, read on...

Difficulty: Moderate

Instructions

Things You'll Need:

• primary residence
• home mortgage
• verifiable income
• be in need of foreclosure assistance

1. 
   Refinance your home loan

   This refinancing act is effective October 1, 2008 through September 30, 2011; around 400,000 home mortgages are expected to be eligible for mortgage refinancing.

2. 
   Home equity

   This program is for borrowers at risk of foreclosure, providing a way for borrowers to refinance mortgages and convert to an FHA-insured loan. Qualified mortgage holders can cancel their home mortgage and refinance with a 30-year, fixed rate, FHA insured loan up to 90% of their home’s value. The borrower can take advantage of refinancing to get a lower mortgage interest rate and a dependable monthly payment.

3. 
   Qualify for refinancing

   To qualify, you must:
   - have a mortgage payment that is more than 31% of your income
   - have begun your loan by 1/1/08
   - live in the house and not have a second home
   - have a verified monthly income
   - have trouble affording your mortgage
   - not intentionally missed any mortgage payments

4. 
   Avoid foreclosure

   Even though you may qualify for this program, participation by mortgage lenders is voluntary, so they must be willing to refinance your loan instead of foreclosing on your mortgage. By refinancing your home loan, the mortgage lender will take a loss, but probably less of a loss than if you default on your mortgage and they foreclose on your home. Visit an FHA-approved mortgage lender or mortgage broker to look at your mortgage refinancing options.

5. 
   FHA mortgage refinance

   The catch: because there is an automatic 10% home equity built into the refinanced loan, the equity (and future appreciation) is shared with the FHA. See the links in the “Resources” section for more information about this aspect of the refinanced loan.

Tips & Warnings

• If you are in need of immediate foreclosure help, you may not have to wait until October 1st. FHASecure is the FHA's current refinancing program; you can get more information through HUD.gov.
• Do not intentionally make late payments to your mortgage; lenders are not required to participate in this program and it does not guarantee you refinancing.
• Read the fine print of the act by following the link in the Resources section.

Resources

• Summary of the “HOPE for Homeowners Act of 2008"
• Full text of the act

[johnrchall]

on 5/7/2009 Nice article. Very informative and timely. Keep posting. Also, I know this site that might help homeowners who need loan modification. Visit http://houseloanhelp.com/help/loan-modification-help.php

[coachmac4]

on 1/20/2009 Very timely and well written article. 5*

[kaytay]

on 1/13/2009 great article.

[Meri]

on 8/1/2008 Well written; good information.

[amylaine]

on 8/1/2008 great info