In the year 2010, the U.S. Department of Housing and Urban Development made an effort to assist dependable house owners who have a loan that is more on the mortgage than the value of the property. The U.S. Department of Housing and Urban Development has attuned its Short refinance program that was formerly publicized to enable the lenders to offer extra refinancing choices to the house owners. Commenced on September 7, 2010, the Federal Housing Administration (FHA) provided few underwater non-FHA borrowers the prospect to be eligible for a new FHA insured mortgage. This scheme is for few non-FHA borrowers who are up-to-date on the existing mortgage and whose lenders consent to dismiss at least ten percent of the principal balance of the first mortgage that is due.

The new Short Refinance program is aimed to assist people who owe more on their mortgage than their home is worth, in other words underwater. This is because the local markets witnessed huge turndowns in house values. Some amendments and other programs were formerly pronounced in the month of March. These have been put in place to facilitate the organization to meet its target of evening out the housing markets by providing another opportunity to all the struggling house owners by the end of year 2012.

The U.S. Department of Housing has offered a helping hand to almost all the people who are up-to-date on their mortgage and are going through financial difficulties because the property values in their area have turned down. This is a different means to help trounce the negative equity problem that several dependable house owners are facing, and are looking to refinance into a more secure mortgage product.

Recently, FHA published a mortgagee memo to give guidelines to the lenders on how to apply this new development. Involvement in FHA's Short refinance program is intended and requires the approval of all property holders. To be qualified to avail a new loan, it is mandatory for the house owner to be indebted more on the mortgage than the house is worth and also be up-to-date on the existing mortgage. The house owner must be eligible for the new loan under standard FHA underwriting requirements and should have a credit score equal to or greater than 500. The property should be the house owner's main home. Also, the borrower's already existing primary lien holder must approve to cancel out at least 10 percent of the unpaid principal balance, showing that the borrower's joint loan-to-value ratio is no greater than 115 Percent.

Also, the existing loan that requires to be refinanced should not be an FHA-insured loan, and the refinanced FHA-insured prime mortgage must have a loan-to-value ratio of no more than 97.75 percent. The interested house owners can contact the respective lenders to decide if they are entitled and whether the lender would agree to put in writing a part of the principal amount that is due.