In 2010, the FHA offered a program designed to help those who were underwater on their home loans, owing more on the loan than the property was worth. That program was called FHA Refinance Of Borrowers In Negative Equity Positions.

FHA.com: Home Purchase and Refinance Loans

FHA Loan Programs for 2024

The most recognized 3.5% down payment mortgage in the country. Affordable payments w/good credit.

Are You Watching Your Credit Score?




- Improving Your Credit Score Has Never Been More Important -

FHA.com is a privately owned website, is not a government agency, and does not make loans.
FHA Home Loans

Choose a Loan Type

FHA.com is a privately owned website, is not a government agency, and does not make loans.

FHA Extends Refinance Program for Underwater Borrowers

December 15, 2014

In 2010, the FHA offered a program designed to help those who were “underwater” on their home loans, owing more on the loan than the property was worth. That program was called FHA Refinance Of Borrowers In Negative Equity Positions and was set to expire at the end of 2014. But the FHA has given new life to this program and borrowers now have much more additional time to review their options.

The FHA announced this  extension in FHA mortgagee letter 2014-23 describes the original “FHA Refinance of Borrowers in Negative Equity Positions” program as a way to give, “a greater number of responsible borrowers an opportunity to remain in their homes.”

The program helps, “to maintain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan. This opportunity allowed borrowers to qualify for an FHA refinance loan provided that the lender or investor wrote off the unpaid principal balance of the original first lien mortgage by at least 10 percent.”

Two years after the original launch of the negative equity refinanced program, FHA Mortgagee Letter 2012-05 was issued, amending the program to include a Short Refinance Trial Payment Plan.

This change “allowed first lien holders to extinguish second lien debt, expanded the allowable debt-to-income ratios on manually underwritten loans and extended the expiration date of the program to December 31, 2014.”

The new FHA Mortgagee Letter issued in late 2014 by the FHA, “extends the expiration date of the program to December 31, 2016. The Mortgagee Letter also reiterates the permitted use of proceeds from government entities and instrumentalities of government to extinguish a portion of the negative equity. All other provisions of MLs 2010-23 and 2012-05 shall remain in effect.”

The mortgagee letter also reiterates FHA policy for this program, stating, “One eligibility requirement of the Short Refinance program is that the existing first lien-holder must write off at least ten percent (10%) of the unpaid principal balance of the loan being refinanced. If further reduction to the unpaid principal balance is required to bring the Loan-to-Value (LTV) ratio of the new refinanced loan down to 97.75%, FHA allows proceeds from government entities and instrumentalities of government to be used.”

Borrowers should discuss their needs with a lender or contact the FHA directly for information on program eligibility.

Do you know what's on your credit report?

Learn what your score means.