Released: August 31, 2007

FHA to help refi at-risk mortgages

Source: Noelle Knox, USA Today

Some homeowners with risky “subprime” adjustable-rate mortgages will be able to refinance before they lose their home to foreclosure, with the help of steps President Bush will announce Friday, senior administration officials said Thursday night.

An estimated 80,000 homeowners with bruised credit and subprime ARMs they can no longer afford will be able to refinance loans, which the Federal Housing Administration (FHA) would insure.

The move marks a historic expansion of the role of the FHA, a Depression-era agency that has traditionally served low- and moderate-income families and first-time buyers, but not delinquent borrowers. Nearly 16% of subprime borrowers are behind on their ARMs, and an estimated 2 million subprime ARMs totaling about $600 billion will reset to higher rates through the end of next year.

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