Hey, I know from my email that many of you have been starving for information about the oh-so-coooool FHA Short Refi program. Yep, the one that involves your mortgage lender writing down your expensive underwater mortgage to 97.5% of your home's value and replacing it with a spanking new FHA mortgage.

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The catch? You have to be current on your mortgage and have credit good enough for an FHA mortgage. Yes, the guvvies in all their infinite wisdom actually expected mortgage lenders to take a performing loan (one that you are making payments on and are current on) with a higher-than-market rate of interest (because upside-down mortgages are pretty much impossible to refinance) and not only take it off its books but pay for the privilege.

The real life equivalent

Let's put this into a real-life scenario for a normal person. It's like you have a job that pays $50,000 a year and a contract that says you have this job for the next five years. Then someone from the government calls you up and asks to to accept $40,000 a year instead to help the general economy. You have obligations to your own family and your own creditors. Well, the lender has those same obligations to its stockholders and creditors. Not as warm-fuzzy but actually a lot more legally enforceable.

So your family would be bummed if you took the pay cut but that's all they could do: impose emotional blackmail. The lenders' shareholders,on the other hand, could sue because the lenders are obligated to act in their best interests to the extent that the law allows. So they aren't being jerks (okay, maybe they are), but they also have an obligation they can't just blow off to pitch in.

Even Freddie and Fannie have passed on the program

And they are pretty much owned by the government at this point. You'd think someone could threaten to cut off their allowance or something... A search for a list of participating lenders turned up zip. Bubkis. Nada.

How many FHA Short Refis have been funded?

None that we know of. But out of over $150,000 refinance applications, a whopping 14 were for Short Refi according to HUD's September FHA Outlook.

So, what should you do if you are upside down?

Don't count on getting an FHA Short Refinance. If you are upside down, you might be better served by a mortgage modification.Especially if your credit is too bad to get a mortgage with a good rate in normal circumstances. HAMP gets you as low as 2%, but most lenders are doing proprietary mods as well. Go to HOPE LoanPort for modification information, mortgage counseling, and other help. But if you hold your breath for a Short Refi you'll probably die waiting.