What was the FHA Short Refinance (Borrowers in Negative Equity Positions) program?

All mortgages under the FHA Short Refinance (Borrowers in Negative Equity Positions) were required to close on or before December 31, 2016.

The FHA Short Refinance program allowed the Lender to refinance a non FHA-insured mortgage in which the Borrower was in a negative equity position.    The existing first lien holder was required to write off at least 10 percent of the unpaid principal balance.  The Borrower must have been in a negative equity position and may not have had an existing FHA-insured mortgage. The Borrower must have been current on their mortgage or successfully completed a three month trial payment plan on the mortgage. The Lender was not permitted to use Premium Pricing to pay off existing debt obligations to qualify the Borrower for the new mortgage.  The Lender was not permitted to make mortgage payments on behalf of the Borrower or otherwise bring the existing mortgage current to make it eligible for FHA insurance.   The refinanced FHA-insured first mortgage must have had a Loan-to-Value (LTV) ratio of no more than 97.75 percent and any new or re-subordinated mortgages must not have resulted in a Combined Loan-to-Value (CLTV) ratio greater than 115 percent. 

Additional program requirements related to:     
•    Borrower Certification,      
•    Trial Payment Plan, and      
•    Underwriting requirements 
are available in Handbook 4000.1 II.A.8.e. 

For additional information see Handbook 4000.1 II.A.8.e. available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
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US Department of Housing and Urban Development

Topic Information
  • Topic #: 57345-8503
  • Date Created: 12/23/2015
  • Last Modified Since: 10/27/2017
  • Viewed: 536