/PRNewswire/ -- First loan modifications, then short sales ... now it's the short refi. Officially known as the FHA Short Refinance Program, it's the latest band-aid in Obama's bailout plans aimed at resuscitating Florida's underwater homeowners facing foreclosure. Oppenheim Law helps homeowners understand the "short refi" pros and cons.
The FHA Short Refinance Plan now offers aid to people who owe more than their mortgage is worth. Will it bring life back to the real estate market and stimulate the economy? This is the question market analysts and legal bloggers like Florida Attorney Roy Oppenheim are debating.
One of the biggest dangers facing the housing market is the glut of underwater homeowners who could default if their financial situations or home prices worsen. About 11 million borrowers, or 23% of households with a mortgage, were underwater as of June 30, 2010, according to CoreLogic Inc. That number is expected to double next year.
"This is a much needed program, but just might be a case of too little, too late," says Oppenheim, who continues to help Florida homeowners navigate through the tides of the real estate market. "Servicers will not be highly motivated and sometimes inclined to steer towards foreclosure." In addition, the Program, at best, is designed to help about four million homeowners according to the U.S. Housing and Urban Development (HUD) Website.
Criteria for FHA Short Refi Program
-- Must occupy subject property as their primary residence
-- Must be current in your mortgage loan
-- Must be in a non-FHA loan
-- Credit score must be at least 500
-- Bank must agree to write off at least 10% of principal and
-- Second mortgage must be willing to cooperate (if applicable)
For two years, Oppenheim Law has advocated a much broader and bolder refi program pushing for an FDR-style program modeled after the Homeowner's Loan Corporation that assisted underwater homeowners during the Depression.
"History proves it's always the refinance market leading the country out of recession. This time, because the banks have absolutely no incentive to refi, they will not," said Oppenheim. "A strong government program could easily and quickly pump $50 billion back into the economy."
William H. Gross, managing director at Pimco, a giant manager of bond funds, has also proposed the government refinance millions of mortgages at lower rates.
"A more comprehensive short refi program would increase jobs and improve consumer sentiment," noted Oppenheim.