Hope for Homeowners Act

HUD Relaxes The Hope for Homeowners Program Requirements!

Here are the changes as of November 19th, 2008.

1.  Increasing the loan to value ratio (LTV) from 90% to 96.50% for some H4H loans: for borrowers whose mortgage payments represent no more than 31 percent of their monthly gross income and household no more than 43 percent.

2.  Simplifying the process to remove subordinate liens by permitting upfront payments to lienholders in exchange for releasing their liens, to permit more borrowers access to the program. 

3.  Extend mortgage loan financing terms to include 30 and 40 year amoritization schedules.  This will help to further reduce the housing payment to a qualifying and comfortable level which homeowners can afford to pay.  

These changes in the underwriting guidelines should cause the lenders to actually deliver the H4H program to consumers in the coming months.  I will keep you posted.  Come back to watch the videos under the  "Video Alert" graphic.  

A summary of the legislation is below:

The “HOPE for Homeowners Act of 2008" creates a new program within FHA to back FHA-insured mortgages to distressed borrowers.  The new mortgages offered by FHA-approved lenders will refinance abusive loans at a significant discount for homeowners facing difficulty meeting their mortgage payments. 

The program is built on five principles:

• Long-term Affordability.  The program is built on the idea, expressed by Federal Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures.  New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable homeownership.

• No investor or lender bailout.  Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance.  However, these losses would be less than the losses associated with foreclosure.

• No windfall for borrowers.  Borrowers will share their new equity and future appreciation equally with FHA.  Borrowers will pay for the FHA insurance.

• Voluntary Participation.  This will be a voluntary program.  No servicers will be compelled to participate.

• Restore confidence, liquidity, and transparency.  Credit markets are fearful and frozen in part because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth.  This program will create certainty and get markets flowing again.

Program Administration. The new program will be overseen by a Board made up of the Secretary of HUD, the Secretary of the Treasury, and the Chairman of the Federal Deposit Insurance Corporation (FDIC).  The Board will have the authority to develop standards within the framework of the legislation. 

Eligible Borrowers. Only owner-occupants will be eligible for the new FHA-insured mortgage.  No investors or investor properties will qualify.  The Board will establish other eligibility criteria, including criteria designed to determine whether borrowers can afford their existing loans. 

New Loan Amount.  The size of the new FHA-insured loan will be determined by:

• The lesser of the amount the borrower can afford to repay, as determined by the current affordability requirements of FHA, taking into account the amount of income available to the family after basic expenses are paid (residual income); or,

• The amount of the existing loan minus a discount established through an auction process established by the Board.  The auction process will allow for bulk refinances, at a discount, of eligible loans.  The federal government will not take possession of the mortgages.

• The Board will have flexibility to change the affordability standards to suit circumstances.

• In either case, FHA will not insure more than 90% of the current value of the home.  Loans must be 30-year, fixed rate loans.

Equity Sharing. In order to avoid a windfall to the borrower created by the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly-created equity and future appreciation equally with FHA.  This obligation will continue until the borrower sells the home or refinances the FHA-insured mortgage.  Moreover, the homeowner’s access to the newly created equity will be phased-in over 5 years.

Existing Subordinate Liens. Before participating in this program, all subordinate liens must be extinguished.  This will have to be done through negotiation with the first lien holder.

Qualified Safe Harbor. The legislation provides servicers with an incentive to participate in the program by offering a safe harbor against legal liability.

Funding.  The Act provides for $20 billion in credit subsidy, which is expected to insure new, affordable loans that refinance approximately $400 billion in troubled mortgages.

Program Sunset.  The program sunsets at the end of 2012.  Any remaining funds, and future collections resulting from appreciation of FHA-insured mortgages made under this program, will be returned to the government.

New Foreclosure Prevention Affordable Housing Goal for Fannie Mae and Freddie Mac. In addition to the FHA option, the legislation requires the Secretary of HUD, together with the Secretary of the Treasury and the Director of OFHEO, to establish a new Foreclosure Prevention goal for Fannie Mae and Freddie Mac.  The two enterprises would be required to purchase eligible loans at a discount, and write down those mortgages to help the families keep their homes.  Mortgages would have to be written down according to the same criteria as loans eligible for FHA insurance under this legislation – based on ability to pay, taking residual income into account.  OFHEO would be given the authority to require the enterprises to raise additional capital commensurate with the additional risk this new goal may pose. 

Summary of the Dodd-Shelby Admendment to the Federal Housing Finance Regulatory Reform Act of 2008

Actual Act: Click Here   See the content beginning on page 365

Modifications of the Act: Click Here

Note:

The HopeforHomeownersProgram.org  was developed to assist home owners in understanding the new Federal sponsored FHA - Hope for Homeowners Program.  This program is offered under the Federal Housing and Economic Recovery Act f 2008.  The information provided on this site is deamed reliable and accurate. The information does change when information changes as provided by FHA/HUD and any other providers deamed reliable.   This site is NOT a FHA/HUD direct site.  It is advised that the site viewer do as much research as possible from this site as well as outside sources to make an informed decision regarding their housing. 

All loan applications submitted through the links in this site are secure and safe under Sorbanes Oxley federal act.  We take pride in delivering the most current information regarding this program to the general public.