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Federal Help For Subprime Borrowers
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The sub prime mortgage crisis and a depleting real estate market in the United States has resulted in millions of people facing the risk of losing their homes due to foreclosure.
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With the objective of extending a helping hand to borrowers affected due to sub prime home loans, the Federal Housing Administration (FHA) has introduced new lending policies known as FHA Secure Loans.
Subprime mortgage loans are primarily high-interest ARM loans. The interest rates are at a bearable level during the initial 2 to 3 years. At the end of this initial low-interest period, the interest rates are adjusted according to market index. Several borrowers find it difficult to make mortgage payments once the interest rates get adjusted. As a result, they end up as defaulters. FHA Secure plan is aptly suitable for such borrowers.
Under this plan, borrowers who default with the loan repayments can have their sub prime mortgage loans refinanced. This plan allows delinquent hybrid ARM borrowers to move into reasonable, fixed-rate mortgage loans. However, only borrowers having a creditworthy history before the interest rates were adjusted are eligible to apply for this plan.
This plan is highly beneficial for low and middle-income American families as it helps the families from losing their homes to foreclosure. In order to be eligible for this loan, applicants must have a good employment history and should be able to earn a monthly income sufficient enough to make the mortgage payments. Another advantage of this plan is that it requires the homeowner to make very low down payment. The applicant must keep three percent of the loan value in cash or homeowner equity.
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