After years of groundwork, MSI Mortgage Services III LLC said it has finally put together all the pieces so it can refinance hundreds of underwater conventional loans per month through the FHA’s short sale program.
The Bloomington, Ill.-based mortgage lender has lined up a firm to purchase the servicing on the short refis, and is securitizing a pool of 61 loans. The $8 million Ginnie Mae securitization is slated to close on Thursday, June 21.
Mark Stamm, a consultant working with MSI on the project, said it was not easy finding a servicer to work with.
MSI approached scores of servicers that refused to touch the servicing—mainly because there are so few FHA short refis and there is no performance history.
Finding a servicer really “held up” the project, Stamm told National Mortgage News. He declined to reveal the servicer’s name.
The Federal Housing Administration rolled out the short refi program in August 2010. During the first four months of this year, FHA lenders originated only 538 short refis. “We are now actively putting deals together with servicers and hedge funds that want an originator to do these loans,” he said. Stamm works out of MSI’s call center in Frederick, Md., with MSI vice president Bob Bodell.
In a FHA short refi, the investor must write down the principal amount of mortgage debt by at least 10% to get the first lien down to a loan-to-value ratio of 97.75% or 115% with a second mortgage. If the loan is delinquent, a borrower can qualify by completing a three-month payment trial.
Most of the eligible loans include non-GSE, alt-A and subprime products. “We think we will be able to do several hundred loans a month very shortly,” Stamm said.
