Am I eligible for an FHA Short Refinance if my existing conventional loan was modified?

A borrower who is delinquent on their current mortgage must successfully make three on-time payments on a trial payment plan before closing.

At the time of underwriting the new FHA-insured mortgage, the new total monthly mortgage payment amount cannot increase by more than 6 percent over the trial payment amount on the existing mortgage.

The lender must document in the case binder the borrower’s successful completion of the most recent trial payment plan.

New or re-subordinated secondary financing that permits the borrower to comply with the eligibility requirements of the program is permitted, subject to the following limitations:

  •   the terms of the subordinate lien(s) must not provide for a balloon payment before 10 years, unless the property is sold or refinanced;
  •   the terms must permit prepayment by the borrower, without penalty, after giving 30 days advance notice;
  •    periodic payments, if any, must be collected monthly; and
  •    if payments on subordinate financing are required, they must be included in the qualifying ratios unless payments are deferred until at least 36 months after disbursement.

To locate an FHA lender in your area please visit: http://www.hud.gov/ll/code/llslcrit.cfm The Consumer Fact Sheet for FHA Short Refinance is available at

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/ins/sfh_short_refinance

Handbook 4000.1 II.A.8.e.ii.(B) is available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh