That’s right – if you’re upside down on your loan, there is a new program designed to help homeowners refinance into a long-term, fixed rate. This program through FHA is called Short Refinance – handled just like a short sale but is actual FHA HELP.

The list of lenders accepting Short Refinances is growing at a rapid rate. In January 2008, there were 3 mortgage servicers and the list has grown to over 10 major lenders. There is pending legislation that could make Short Refinances common practice and minimize the ongoing risk of borrowers losing their homes to foreclosure.

There are conditions to the program such as, being current on mortgage payments, forgoing a rigorous approval process – which can sometimes take several months to complete, and being game-fully employed. The program also does not address second and third deeds of trust where the total encumbrances are outside of the program’s limits. Enterting into the program also affects credit ratings in a negative way.

The program works like this; once approved the current loan is refinanced at today’s value. The difference between the existing loan and the new loan is written off by the existing lender. The write-off amount is then reported to credit reporting bureaus as a short sale. You are not responsible to ever pay back this amount, nor penalized with capital gains on Income Taxes.

So before deciding on a short-sale, talk to a lender about the FHA Short Refinance program. Or to find qualified lenders visit the FHA website: http://www.fha.com/

It could just make the difference of keeping your home.