FHA Keeps One FHA Secure Option for Refis

The Department of Housing and Urban Development is terminating the FHA Secure program for refinancing delinquent borrowers, but it is still keeping one option that made it easier for borrowers with second liens to refinance into a Federal Housing Administration loan. "While FHA will retain its standard rate and term refinance program for borrowers who are current on their existing mortgages, the FHA Secure program ... will terminate on Dec. 31, 2008," HUD says in a letter to FHA lenders. In a separate mortgagee letter, FHA updates its refinancing guidelines and said it will allow borrowers to re-subordinate second liens, which was an option provided under FHA Secure. FHA also has tightened its appraisal requirements on cash-out refinances where the loan-to-vale ratio is above 85%, according to Bud Carter, an FHA consultant with Potomac Partners. "FHA now requires two appraisals on cash-out refinancings above an 85% LTV, regardless of the amount of the loan," Mr. Carter said. Previously, FHA required two appraisals only if the loan amount was above $417,000.