The Federal Housing Administration (FHA) soon will roll out a special refinancing program to help underwater homeowners take advantage of historically low loan rates.

"Very soon, we will be introducing the new FHA Short Refinance program — an expanded refinancing option for non-FHA borrowers who are underwater and owe more on their home than it is worth," Housing and Urban Development (HUD) secretary Shaun Donovan said.

The secretary spoke at a foreclosure prevention and housing counseling event in Riverdale, Md., on Friday morning.

Back in March, HUD officials said they would create a refinancing option that requires principal writedowns on the part of investors.

This refinance option requires servicers to write down the principal amount of the mortgage by at least 10% so the loan can be refinanced into a standard, fully underwritten FHA mortgage with a 97.75% loan-to-value ratio.

To qualify, the borrower must be current on the existing mortgage and payments on the new FHA mortgage cannot exceed 31% of the borrower's income.

If there is a second lien on the property, the refinanced combined LTV cannot exceed 115%.

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