Aundrea Beach-Greco Blog

HOPE FOR HOMEOWNERS (H4H)
MORTGAGE ASSISTANCE TO STRUGGLING HOMEOWNERS

HOPE for Homeowners (H4H) will provide another resource to the Federal Housing Administration’s (FHA) existing efforts to aid struggling homeowners. Under the program, borrowers having difficulty paying their mortgages will be eligible to refinance into FHA-insured mortgages they can afford.

For borrowers who refinance under HOPE for Homeowners, lenders will be required to “write down” the size of the mortgage to a maximum of 90 percent of the home’s new appraised value. In many instances, lenders will determine that such a reduction in principal will allow them to avoid a costly foreclosure, while helping borrowers stay in their homes.

HUD strongly encourages borrowers to work with their current lender/servicer to determine if HOPE for Homeowners is the right program for them. Lenders should explore all options, including HOPE for Homeowners, before issuing foreclosure notices. For lenders, this voluntary program will serve as another loss mitigation tool that can be used to help families keep their homes.

Sustainable, Affordable Homeownership

HOPE for Homeowners will only offer 30-year fixed rate mortgages – so the borrower’s last payment will be the same as the first payment. Further, this program will maintain FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.

Consistent with statutory requirements, borrowers must also meet the following criteria:

• Their mortgage must have originated on or before January 1, 2008;

• They cannot afford their current loan;

• They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments;

• They do not own a second home or other properties;

• Their mortgage debt-to-income must be at least 31 percent and greater;

• They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years;

• They must follow FHA’s long-standing and strict policy of fully documented income and employment.

• Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.

• To participate, existing subordinate lenders (ie: 2nd lienholders) must agree to release their outstanding mortgage liens.

The new HOPE for Homeowners mortgage payment must be at or below 31 percent of the borrower’s income, unless there is ‘trial modification’ period prior to loan application. A trial modification would give borrowers the opportunity to demonstrate their capacity and willingness to make a mortgage payment that does not exceed 38 percent of their monthly income.

Funding

FHA will insure up to $300 billion in new loans.

Program Timeline

The program will last from October 1, 2008 through September 30, 2011.

Voluntary Lender Participation

FHA will continue to offer lenders an alternative to foreclosing on borrowers. Similar to the FHASecure program, lenders will be required to write-down the outstanding mortgage principal balances to 90 percent of the new current value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Homeowners In Need Should Act Now

While lenders are gearing up to offer this new program, families should not wait to seek mortgage relief. Right now, homeowners can determine if they are already eligible for mortgage assistance through FHASecure. They can obtain information through any of the following options:

1. Contact current lender

2. Contact a local, HUD-approved housing counseling agency at HUD.gov;

3. Contact the HOPE NOW Alliance at 1-888-995-HOPE; or

4. Call FHA at 1-800-CALL-FHA.

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 H4H Key Points 

• FHA H4H program allows refinance at 90% of current appraised value
• Owner occupied only
• Borrower cannot have ownership interest in other residential real estate including second homes and/or rental properties
• Borrower must have made at least 6 full payments on the mortgage
• Borrower may not have intentionally defaulted on their mortgage
• Borrowers convicted of fraud within the last 10 years are not eligible
• Borrowers must certify that they did not knowingly, or willfully and with actual knowledge, furnish false material information for the purpose of obtaining their existing mortgage(s)
• Borrowers debt to income ratio as of March 1, 2008 must be greater than 31%
• The first mortgage must have been originated on or before January 1, 2008
• Property must be one unit dwelling (SFR, Condo, townhouse, manufactured home)
• Appraisal must be ordered specifically for the H4H program and cannot be more than 3 months old at closing
• Monthly MIP (Mortgage Insurance Premium) is calculated at 1.5% (this is 3 times the normal FHA rate)
• Upfront MIP (which is financed into the new loan) is 3% of the base loan amount (2 times the normal FHA rate)
• Only 30 year fixed rate loan program available
• Limited availability of 2^nd mortgages for the first 5 years (only for safety/health repairs)
• Closing costs can be included into the new loan but cannot exceed the 90% loan to value
• As a condition of the H4H mortgage, the borrower agrees to share with HUD in both equity (50%) and appreciation (100% 1^st year…50% year 5 and beyond)
• See Example of Equity Sharing
• Lienholder/servicer is NOT required to participate in this program – voluntary

Additional Links

HUD website

HUD Mortgagee Letter _ HOPE Program

H4H Consumer FAQ

H4H Examples of How Equity and Appreciation Are Shared

Call today for more info to see if you qualify for this new FHA loan program! 

Aundrea Beach-Greco
Certified Mortgage Planner, CMPS™
702.326.7866 | 877.AUNDREA

info@aundreabeach.com