A government program aimed at helping “underwater” homeowners refinance into more-affordable, reduced-principal loans has captured only a sliver of the borrowers thought to be eligible in the four years since its introduction.
The Federal Housing Administration’s Refinance of Borrowers in Negative Equity Positions program, more commonly known as the F.H.A. Short Refi, enables borrowers who owe more than their homes are worth to refinance into an F.H.A. loan with a lower monthly payment.
But lender participation is voluntary. And only about 4,600 F.H.A. loans have been originated under the program, a far cry from the 500,000 to 1.5 million borrowers the Department of Housing and Urban Developmentestimated could be helped when it announced the program in 2010.
Beyond that, existing F.H.A. loans are not eligible for the Short Refi program. So that leaves a much smaller pool of eligible borrowers whose loans are not backed by the F.H.A. or one of the government-sponsored agencies, but are likely more exotic.
“Most of the loans we do start out as some sort of interest-only, option ARM or one of the other esoteric products that were popular before the crash,” said Brian Faux, the chief operating officer of 1st Alliance Lending in East Hartford, Conn., one of the largest F.H.A. Short Refi lenders.