HUD Issues Mortgagee Letter Regarding FHA Refinance of Negative Equity Borrowers

HUD

On March 13, HUD issued Mortgagee Letter 2012-5, which amends and updates Mortgagee Letter 2010-23 regarding FHA’s Refinance of Borrowers in Negative Equity Positions. Effective immediately, the Mortgagee Letter offers program enhancements to (i) broaden the eligibility for FHA Short Refinance Trial Payment Plans, (ii) offer an additional option for first lien holders to extinguish second lien debt, (iii) increase the allowable housing debt-to-income ratio for loans that receive a “refer” risk calculation, and (iv) extend the program expiration date to cover all loans closed on or before December 31, 2014.