Refinances needed, few given

The news: Less than a year after its launch, the Federal Housing Administration’s Short Refinance program has come under attack in recent months by Republicans looking to tighten the federal budget by slashing the program.

Behind the news: Many homeowners are still drowning in debt after the federal government created a program to bail them out.
The refinancing program was launched last September and allows homeowners with a non-FHA loan to refinance into one if the original lender agrees to write off at least 10 percent of the mortgage balance.

The problem, however, is that the program is underutilized. As of May 24, just 169 of those refinance loans had been approved. Among those, only four were in Illinois.

Experts say the problem is with the program’s strict rules.

According to the FHA, the program requires that the borrower not have late mortgage payments for one year.

“Typically, we’re going to see someone who’s already behind. We’re not seeing a whole lot of people who are current,” said Kristen Komara, director of financial services for The Resurrection Project.

Republicans want to cut the program, but a new analysis shows there is still a need for it.

According to the most recent federal housing data, in 2009, 175,934 people in Cook County applied to refinance their mortgages. People who were black and Latino were denied about 40 percent of the time compared with white borrowers who were denied 19 percent of the time, according to The Chicago Reporter’s analysis.

The refinance program does have benefits for those who can qualify for it. “We believe that [the 10 percent write-down] would be something that would be very helpful and is needed for the families that we give foreclosure counseling,” Komara said.

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