In Mortgagee Letter 2007-11, the Federal Housing Administration announced FHASecure, a temporary initiative to permit lenders to refinance delinquent adjustable rate mortgages (ARMs) and/or to offer new subordinate financing where the combined loan-to-value ratio exceeds the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. 

The Department has decided to expand FHASecure as follows: 

• To include borrowers delinquent on their non-FHA ARMs due to a rate reset or the occurrence of an extenuating circumstance but experienced no more than two 30-day or one 60-day late payment in the 12 months prior to the rate reset or extenuating circumstance that caused the delinquency; or
• To include borrowers delinquent on their non-FHA ARMs due to a rate reset or the occurrence of an extenuating circumstance but experienced no more than one 90-day late payment or no more than three 30-day late payments prior to the rate reset or extenuating circumstance that caused the delinquency provided the loan-to-value on the FHA insured first mortgages does not exceed 90 percent.
• Borrowers delinquent on their interest-only and/or payment option ARMs are not eligible for this expansion: borrowers with these types of mortgages must demonstrate that a rate reset caused the delinquency and that they were making the monthly mortgage payments within the month due during the 6 months prior to the rate reset.
• For borrowers refinancing delinquent non-FHA ARMs the Up-front mortgage insurance premium (UFMIP) is set at 2.25 percent of the base loan amount (loan amount excluding UFMIP) regardless of the loan-to-value (LTV) ratio. For LTV ratios greater than 95 percent (excluding UFMIP) the Annual premium (collected monthly) is set at .55 percent.

FHA is implementing the policies in this letter simultaneously with the implementation of risk-based pricing through notice in the Federal Register May 13, 2008. 

Mortgagees are reminded that

• the eligibility criteria for delinquent borrowers and new subordinate financing under the FHASecure initiative are temporary and require that the loan application be signed no later than December 31, 2008.
• FHA has not changed its underwriting guidelines, but rather its eligibility criteria.  Existing policies are still applicable, such as those involving bankruptcy. 

To view the Mortgagee letter in its entirety including, clarification on FHASecure Eligibility Criteria and Cash-out Refinance Transactions, please click here.

To view the FHA Refinance Programs Comparison Matrix provided by HUD as a quick reference guide, please click here.

Any questions concerning the Mortgagee Letter should be addressed to 1-800-CALLFHA.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 500 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.