New Refinance Program in 2012

?The Federal Housing Administration (FHA) has been very busy over the last year and a half with trying to create new programs designed to assist homeowners in the United States who are "underwater," or owe more than their home is worth, on their current home mortgage loans.
Showing unusual persistence in the face of the continued housing market slump, the FHA has just introduced yet another new program that follows on the heels of the recent FHA "Making Home Affordable"
program as well as the agency's own standard refinancing programs.

The latest scheme will allow FHA mortgage loan lenders to offer new low-interest refinancing loans that will forgive 10% or more of a qualified borrower's original mortgage principal amount. The FHA says the loans are aimed at those home owners in a negative equity position and are making payments on a conventional or sub prime mortgage for a home that is not worth as much as the borrower owes on the original loan. In order to qualify for this new program, the applicants must currently owe at least 15% more on the property than it's actually value in today's home market. Of course, the new loans will also be originated by the FHA as the agency stated that the program is "designed to maintain home ownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan."

Clearing off ten percent of the amount owed on a mortgage translates to a huge helping hand for those who can qualify for the program, but the catch is qualifying, as the Department of Housing and Urban Development (HUD) has emphasized that the new FHA refinancing program will only be offered to those homeowners who have not gotten behind on their mortgage payments and are completely up-to-date with their mortgage lender. There are also a few other eligibility requirements for the new program including residency, as all borrowers must be currently living in the home being refinanced as their primary residence. Potential borrower will also need a credit score of at least 500 in order to qualify as well.

The FHA says its new program was not introduced with borrowers that have FHA mortgages in mind. Instead, the new program was designed for homeowners struggling to pay their conventional or sub-prime loans. An additional clause in the program sets up a time limit in applying for mortgage assistance. Once borrowers have qualified for the program, they can only apply for refinancing on those loans that have FHA case numbers issued on or after September 7th 2010 and were successfully closed on or before the end of this year in 2012.

One "buyer beware" catch in the overall plan is that the homeowners who do take advantage of the program might see an undesirable effect on their credit scores. Although the new plan might help homeowners avoid default or foreclosure on their existing conventional or sub-prime mortgages, the FHA also requires the lenders to inform all potential applicants that enrolling in this loan new forgiveness program could be "reflected as a negative feature on a borrower's credit score." In addition to credit score impacts, the FHA also advises interested applicants to consult a tax professional in order to learn what the tax implications might be when 10% or more of their original home loan amount is forgiven.