More Leeway in Revised FHA Refi Program

Hope for Homeowners, the program put in place in July that was supposed to refinance failing home loans, hasn’t proven to be very workable, critics say.
Now it’s being improved.

The program gives the U.S. Department of Housing and Urban Development $300 billion to refinance failing home loans. But the original plan didn’t take into account that first and second lien holders, on mortgages where multiple lien holders apply, would in some cases fight over letting the buyer walk away.

The original legislation demanded that the lender have the property reappraised and then write off 10 percent of the new value. Now the rules have been modified to give HUD more flexibility to set the new loan level, including giving the second lien holder a buyout.

HUD Secretary Steve Preston says the original plan left lenders dealing with uncertainty. The revised version gives them more control. "It will give them an opportunity to have a bird in the hand rather than something possible down the road," Preston says.

Source: Reuters News, Patrick Rucker (10/21/2008)

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