Stuck with a subprime? Refinance with VA - Navy News | News from Afghanistan & Iraq - Navy Times

Stuck with a subprime? Refinance with VA

Department of Veterans Affairs officials said Friday that they are ready to use new refinancing authority to help veterans with high-interest subprime mortgages refinance into safer, lower-interest veterans’ home loans.

But there are two catches:

• To be refinanced, a home must be worth at least as much as the amount being borrowed, which could disqualify people in areas with dramatically falling housing prices — especially if they bought at the peak of the market.

• A homeowner cannot have defaulted on an existing mortgage because VA is not relaxing its credit underwriting standards in guaranteeing new loans.

Judith Caden, who heads the VA loan program, said she thinks people who are behind on their mortgages solely because they had subprime loans with rapidly escalating payments could be eligible for refinancing if the refinanced loan put monthly payments within their financial means.

The Veterans’ Benefits Improvement Act of 2008, signed into law by President Bush on Oct. 10, includes changes in the veterans’ loan guarantee program that make it easier for people who have non-VA loans to refinance with one of the government-back mortgages.

One big change allows veterans eligible for home loans to refinance up to $417,000 in most locations, and up to $729,750 in some high-cost areas. The previous maximum loan for refinancing was $144,000.

A second change allows 100 percent loans on refinancing, eliminating a previous restriction that allowed loans only for 90 percent of the accessed value.

The law also extends the availability of adjustable rate mortgages, known in the banking industry as ARMs, through Sept. 30, 2012. Authority for such loans was about to expire.

Caden said VA, which never backed subprime loans, is now in a position to help veterans who did not use initially use the veterans’ program. VA regional offices are now prepared to process refinancing under the new rules, she said.

VA has established a national toll-free number for home loan questions that routes customers to their nearest regional office. The number is (877) 827-3702.