I have  a client in NY looking to do a short sale on his house... he is not late on his mortgage. however, he caem with a question I don't  have  answer for... " how do you go about doing a short refi with the bank? and does all the banks do it... is it a gov't program?

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Comment by Steven Pawera on March 13, 2011 at 3:04am

I have a document that lays out the rules for an FHA short refi.  Try google your way to HUD MORTGAGEE LETTER 2010 -23.  

And the secret to getting the current lender to do the balance write-down?  A successful forensic audit of the loan that turns up serious violations would be a nice start.  :)

Comment by Joseph C. Alfe on March 12, 2011 at 7:08pm



your first step is to ask the mortgage lenders that you deal with if they do the FHA Negative Equity Refi Program, then get you client to start the loan origination process.

Comment by Devaykanan Rishudeo on March 12, 2011 at 4:42pm

Ok... can you provide me with a contact #. Mine is 917-470-1053. Cause I am not getting everything.


Comment by Joseph C. Alfe on March 12, 2011 at 2:58pm
you are not listening.  You do not go to the current bank first.  If you ask them to do a Principal reduction, they will say no.  You do not approach the current lender until you have a loan approval and appraisal done by the new lender, under the FHA program.
Comment by Devaykanan Rishudeo on March 12, 2011 at 1:35pm

Lets do 1st thing 1st. I have to let the current bank know we are phalanning to do a short refi. on the mtg. and hopefully they are not surprise by that. How do we go about request from the current bank. this info?

Comment by Joseph C. Alfe on March 12, 2011 at 1:14pm

actally Lewis, most lenders participating in the program have their own overlays for credit and LTV.  I have not found a single bank that will allow more than the 97% CLTV, or credit under 660.


There are two issues here:  #1 is finding a new lender to refinance using the new program.  This has been the hardest part.  Many lenders have not heard of the program and refuse to believe that it exists. It is very hard for a lender to underwrite a file with an LTV of 130% under the ASSUMPTION that it will be 97%.


#2 after you get a lender to issue you an approval, then you try to get the current lender to reduce principal.


So, The first thing you need to do is to find a new lender that will underwrite to the FHA guidelines and issue a conditional approval.  After you have that, contact me and I can help with the rest.

Comment by Lewis Corcoran on March 12, 2011 at 12:00pm
As an addendum to Joe's comments (which is correct), the FHA underwater mortgage refinance program also provides incentives for second mortgage holders to either reduce or extinguish the value of the second lien.  The maximum amount of mortgage debt that a borrower participating in the FHA program will have after the loan modification is 115% of the value of the current market value of the home - a maximum of 97.75% for the new FHA insured primary mortgage, and a maximum of an additional 17.25% for the refinanced second mortgage.
Comment by Devaykanan Rishudeo on March 12, 2011 at 10:43am
Hey Joseph, that is valuable info my friend.  My question are all the bank obligated under this guidelines? and what  are the chances they will reduce the principal. I guess you've got to know how package something like this. is their a website to get the info, or you call the bank and request a short refi. I guess you gotta know the trick to get the current bank to take 97%. If i need help with this file would you please help me.
Comment by Joseph C. Alfe on March 11, 2011 at 11:47pm
I am doing these now.  The only lender so far that will do the refinance is FHA under their new "Negative Equity Refi Program,'  You know, the one Republicans are trying to kill before it can help any middle class homeowners.  Basically it is a regular FHA loan, and you must qualify, ie; no mortgage lates in 24 months, 640 credit, income/asset verification, etc. The only difference is that the underwriter will approve the loan on the condition that the current lender will reduce it's principal balance to 97% of the new FHA appraisal value.  The trick is to get the current lender to do the balance write down, and that my friend, is the secret.


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