Federal Housing Administration Secure
FHASecure is a refinancing option that gives homeowners with non-FHA adjustable rate mortgages (ARMs) the ability to refinance into a FHA-insured mortgage. The borrower must have been current on their payment before their arm adjustment and must show that the adjustment or reset of their current mortgage has caused them to be delinquent. You will have to be able to qualify through the normal process for a FHA mortgage.
Even though this program was rolled out with good intentions we have not seen it help as many borrowers as we thought it would. One problem is you must still be able to qualify for a FHA loan. Many people that took out the subprime loans or Option Arm's did not have the ability to qualify with full documentation. With this program there is no option but to qualify with full documentation. The other problem is people have lost equity. This program does not make up for any "negative" equity. If your house will not appraise with at least 3% equity, you will not be able to do a FHA loan. The borrower would have to negotiate with the current servicer of their loan to forgive some of their balance or find a new lender that is willing to put a 2nd mortgage to cover the difference. I have seen some banks forgive some of the debt but I haven't seen any banks give out 2nd's over the appraised value.
There is one unique option with FHA loans that does help this situation. FHA loans will allow you to keep your current 2nd mortgage open (subordinate), even if it means you owe more than the house is worth. Example, you took out an 80/20 loan. First mortgage was at $160,000 and 2nd was $40,000 ($200,000 total loan amount). Your house now appraises at $180,000 and you are upside down $20,000. You can take out an FHA loan for $174,600 (3% of appraised value). The bank that owns the 2nd mortgage has to be willing to sign a subordination agreement that keeps their loan open and in 2nd position. This is hit and miss if the banks will do this but it is worth checking on.