Refinance of an NSP home
I bought my home through the Neighborhood Stabilization Program with an FHA loan and a grant from Maricopa County. The price of the house was 139.9k, after all funding was applied along with the money I brought (not much), my loan was for ~126k. I'm down to ~123k as of this month, and comps are running 155-165k in my neighborhood. The NSP funds act as a junior lein on the property, and if it changes hands, I have to pay it off.... but if I stay in the property, the 15k "loan" is forgiven. Five thousand is forgiven after five years, with an additional one thousand forgiven per year afterwards.
My question is this: If I attempt to refinance out of the FHA loan, now that my PRINCIPAL has hit the 80/20 tipping point, does the lein from NSP count against the equity of the home, preventing me from closing on a conventional loan and cutting my payment nearly in half?