Submitted by Tim Burrell:  There are a number of homeowners who have gotten into financial trouble by taking out Adjustable Rate Mortgages, frequently called ARMs, where the amount of the monthly payment has just changed dramatically.  These loans start with low rates, called Teaser Rates, that last for a limited amount of time.  Then, they adjust to be closer to the market rate.  The new rate is determined by an Index, frequently the cost of funds for the lender, plus a margin, which is the lender's profit. 

Once the period for the Teaser Rate is up, the monthly payments can jump dramatically.  Some homeowners are having trouble making the payments at the new rate.  This problem has been helped by the recent action by the Federal Reserve Board, as their lowering of a key interest rate has decreased the lender's cost of funds, which decreases the index rate on the ARM mortgage, and decrease the monthly payment.  If the homeowner cannot make the new mortgage payments, it frequently starts a financial "death spiral"  that leads to the foreclosure of the home.  This program is a great way to avoid foreclosure.

FHA has implemented the FHASecure Initiative to rescue homeowners in trouble from the jump in their monthly payments.  Basically, if you are having trouble making the payments now, but you were current on your payments before your mortgage payment jumped, the Initiative allows you to refinance with FHA, even if you have late payments on your mortgage.  In other words, if you were financially responsible before the mortgage payment jumped, but got into trouble after it jumped, you can refinance. 

Why is this amazing?  Because a late payment on a mortgage is the "kiss of death" for refinancing.   The refinance lenders look at late mortgage payments as a clear sign that the borrower is in trouble, and a prime candidate for foreclosure, so they do not want to be the one with the loan on the house when it goes into foreclosure.  In order to get top quality loans, any late payments on a mortgage have to be more than a year old i.e. you have to be on time for a year after you have been late.  Since many sub-prime loans are no longer available, many borrowers have to qualify for the top quality loans, or get no loan.  So, getting out of a bad ARM into a conventional 30 year fixed rate mortgage is an amazing opportunity for a borrower who has been late on recent payments.

To get detailed information direct from FHA, go to this website http://tinyurl.com/2p9s2c .  Notice the short URL, that you never get from a governmental agency.   I shrunk it.