New plan creates FHASecure program to help homeowners refinance so they can make payments and keep their homes.

The Bush Administration has created a new FHASecure program to help homeowners to refinance so they can keep their homes. This program isn’t available to everyone, so not all foreclosures will be prevented by the implementation of this program.

The FHASecure program is targeted towards homeowners with strong credit histories who got into trouble with their mortgages when their loans reset, or when the intro rate disappeared and their loans adjusted to the current market rate. This program is not targeted towards homeowners who did cash-out refi’s, which are a growing number of the foreclosures that we’re seeing in the Santa Clarita area.

FHASecure Program Requirements

Requirements for the FHASecure program are as follows:

• A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset.
• Interest rates must have or will reset between June 2005 and December 2009.
• Three percent cash or equity in the home.
• A sustained history of employment.
• Sufficient income to make the mortgage payment.

Costs to refinance with the FHASecure program will include the standard escrow fees with taxes and title insurance, and all loans will be underwritten to make sure that the borrowers have the ability to repay the loan.

Since the FHASecure program is available only to those with good credit, other than the fact that borrowers may have missed a few mortgage payments, it would appear that the message here is to pay credit cards first and mortgage payments second. Otherwise, you wouldn’t have the "good credit" required to qualify for programs such as FHASecure. Not exactly the type of advice you would have expected, huh?

"FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates," says Assistant Secretary for Housing - FHA Commissioner Brian Montgomery.

According to HUD Secretary Alphonso Jackson, "Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled. FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes."

Little Help for Santa Clarita Homeowners

Since the FHASecure program is geared towards those with at least 3% equity in their homes, those who purchased at the top of the market with 100% financing likely won’t qualify for this program. There were pockets of homes sold with these risky loans as Santa Clarita’s new home construction boom was coming to a close, such as the Canterbury’s in Tesoro del Valle, so we’re now seeing high rates of foreclosures in developments like this.

Add to this the fact that the FHA only guarantees mortgages up to $362,790, and you’ll see how limited this "bail-out" program really is. The Bush Administration is attempting to raise this limit to $417,000, the current Fannie Mae and Freddie Mac loan limits, but even this will leave most Santa Clarita homeowners with no relief in sight.

Tax Law Changes for Short Sales

In addition to the creation of the FHASecure program, the Bush Administration is looking to change the tax laws so there will be no income tax penalty for those who are forced to sell their homes for less than their mortgage balances, otherwise known as short sales or pre-foreclosures. Current law states that the amount forgiven is taxable income that must be reported on your next tax return. As an example, say you have a $600,000 mortgage and the home sells for $580,000. The shortfall of $20,000 becomes taxable income under the current law. This tax relief is targeted towards primary residences only, not second homes or investment (rental) properties.

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