Refinancing Throws a Lifeline to Underwater Mortgages - SPONSORSHIP

The long-awaited rules that will allow homeowners with underwater mortgages to refinance using Federal Housing Authority (FHA) loans were finally announced by the FHA in a letter to mortgage servicers on Aug. 6. These loans will allow underwater borrowers to refinance to an affordable FHA loan.

Potentially 20 million homeowners may fall into underwater status by 2011, so the FHA could end up with a lot of underwater mortgages.

If your house is underwater and your interest rate is above 6 percent, you should definitely consider this refinance opportunity when it becomes available. Even if you have a good interest rate, the write-down of your first and/or second mortgage may make this deal worth considering.

You must be current on your mortgage to qualify for this FHA refinance opportunity. Also your lender or investor must be willing to write off at least 10 percent of the original first lien on the mortgage. The new program will be available starting September 7, 2010 and you will have until December 31, 2012 to finalize a refinance deal.