- FHA (not the lender) will pay a partial payment of claim up to 30% of the outstanding mortgage principal in order to make monthly payment affordable to current owner.
- This partial payment of claim/principal reduction amount is NOT forgiven, only deferred.
- There is also NO appraisal.
- Borrower has to demonstrate hardship and other conditions/restrictions apply.
MY Take Aways:
- FHA pays for a reduction in principal (Likely using TARP or some other kind of Recovery $$) via a partial claim.
- Buyer gets an affordable monthly payment at or close to 31% of income for as long the mortgage remains in place--even if that period is to the end of mortgage.
- Buyer remains on the hook for partial claim amount if home is resold etc.(I anticipate ultimately loan forgiveness will occur if net proceeds don't cover partial claim, but there is NO current indication that will happen--just my hunch).
- Lender/servicer gets fees.
HUD press release is HERE.
A link to the Mortgagee Letter is HERE; it includes an attachment HERE. (Appears to me that attachment link is currently back to the Mortgagee letter, instead of to a second document. If this is the case when you open the link, try later OR use the FHA mortgagee letter link in right pane later to see if they have corrected this error).
AP news story is HERE.
My quick read is that to get to home owners to an affordable 31% front ratio, FHA is offering fees to lenders/servicers in exchange for up to a 30% write down of mortgage principal.
(I am sure there are many conditions/caveats so READ the mortgagee letter and attachment so you FULLY understand those conditions and caveats).
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