FHA Considering Subprime Refi Option

Department of Housing and Urban Development officials are considering a way to help certain subprime borrowers refinance into Federal Housing Administration loans, but they have not made a final decision despite pressure from the Bush administration.FHA Commissioner Brian Montgomery said HUD has to consider the impact the additional risk would have on the FHA mortgage insurance fund. "We have not made a decision. We hope to make one soon," Mr. Montgomery told MortgageWire Wednesday evening. Under the plan, FHA would refinance creditworthy subprime borrowers who have been current on their payments up to the time of the reset on their adjustable rate mortgage. FHA could roll some missed payments into the new loan, but they can't go above a 97.75% loan-to-value ratio. In most cases, lenders are going have to write down the loan amount and take a loss so the borrower can fit into a FHA loan.