Connecticut Real Estate Attorney Law Blog


New FHA Short Refinance Program

HUD recently announced a new refinance program for underwater borrowers.  They would be able to obtain, with their existing lender's cooperation, a refinance into an FHA loan.  You must be current and owner-occupied and owe more than the house is worth.  The existing lender must agree to reduce the principal by at least 10% (hence the name short refinance) and the resulting LTV must be no more than 97.75%.  Obviously the loan will have mortgage insurance and you must meet the FHA underwriting guidelines.  If you have a second, the new first and the existing second (subordinated to the new loan) must be no more than 115% of the appraised value.  There is a very good FAQ here.  There is also information on the HUD website.

This program seems like a good but as with most of the foreclosure "rescue" programs limited.  It may fill a gap in the existing programs.  Unfortunately at this time Fannie and Freddie do not appear to be participating, but they also have some similar programs.  This new FHA loan does give the underwater borrower with a lender who is willing to work with the new program an opportunity to avoid eventual foreclosure or short sale. 


About the author:  Attorney Begemann is a member of the Connecticut Bar and practices real estate and business law in Connecticut.  As an experienced real estate attorney he represents individuals and lenders in residential and commercial loan closings across Connecticut, including the purchase, sale and refinance of real estate.

Attorney Paul H. Begemann, 2764 Whitney Avenue, Hamden, CT  06518

Phone 203-230-8739                                       Fax 800-483-1904



5 commentsPaul Begemann • September 14 2010 09:50AM


I think we will see LOTS more of this in the months and years ahead.

My accountant said this about a year ago.....just re-set EVERYONE to current market value and let's get BEYOND this housing issue....

Posted by Ben Benita, Short Sale Negotiator, Author (, ATG Title) over 1 year ago

Good Morning Paul, thank you for the update on the new FHA program.

Posted by Dan Edward Phillips, Realtor and Broker/Owner (Dan Edward Phillips) over 1 year ago

Thanks for the comments, I agree, the existing lenders are most likely going to take the hit eventually, take it now, get the maximum they can out of the property (essentially about 95% of the current value, much better than any short sale or foreclosure scenario) and move on! 

Posted by Paul Begemann (Attorney Paul H. Begemann) over 1 year ago

I wish I could say that I'm optimistic about this program.  Like the others, it is voluntary and demands a lot more from the banks than they are likely to give.

Posted by E.J. "Mike" Carlier ABR CRS GRI Apple Valley MN (Keller Williams Realty Integrity) over 1 year ago

Mike, I probably agree with your comments, the lenders in general do not seem to be able to quantify and agree to take a small hit today rather than a large hit in the future.  Maybe that way they keep the loans on the books at full value eben though realistically they are quite impaired.

Posted by Paul Begemann (Attorney Paul H. Begemann) over 1 year ago

This blog does not allow anonymous comments