About The FHA Hope Program

Hope for Homeowners (H4H)

The fear of unaffordable mortgage payments is a very common reality for many, many homeowners.  Knowing which way to turn can be as confusing as the loan documents that put you in this situation in the first pace.  One option that has received a lot of attention is the FHA Housing recovery bill of 2008.

What is the HOPE for Homeowners:  The HOPE for Homeowners program was created by Congress to help those at risk of default and foreclosure refinance into more affordable, sustainable loans.  Hope for Homeowners is an additional mortgage option designed to keep borrowers in their homes.

The program is effective from October 1, 2008 to September 30, 2011.  As many as 400,000 homeowners could avoid foreclosure through this program over the next three years.  If you are having trouble making your mortgage payments, HOPE for Homeowners may be able to help you, by refinancing your loan into a new 30 year fixed rate loan with lower payments.

Eligible Borrowers:  Only owner-occupants who are unable to afford their mortgage payments are eligible for the program.  No investors or investor properties will qualify.  Homeowners must certify under penalty of low, that they have not intentionally defaulted on their loan to qualify for the program and must have a mortgage debt to income ratio greater than 31 percent as of March 1, 2008.  Lenders must document and verify borrowers’ income with the IRS.

Equity & Appreciation Sharing:  In order to avoid a windfall to the borrower created by the new 90 percent loan-to-value FHA-insured mortgage, the borrower must share the newly created equity and future appreciation equally with the 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 five 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 loan servicers with an incentive to participate in the program by offering a safe harbor against legal liability.

The biggest challenges many folks will find with this program are the strick guidelines for qualifying.  It is important that you compoletely understand this program when assessing your options.

This program takes effect on October 1, 2008.  There are still some details about how it will work that have not been released.  It does seem that this program is a viable option for those that do no plan to ever move or refinance (due to having to pay the Federal Government fifty percent (50%) of all future equity) and can qualify for an FHA loan using full income tax returns, pay stubs and asset documentation.

Here are some of the highlights:

1. Borrowers must certify that they have not intentionally defaulted on the eligible mortgage or any other debt (false statement = fine and/or five years in prison).
2. Current lender must voluntarily forgive balance of existing loan to 90% of current market value.
3. No pre-payment penalties can exist.
4. No subordinate financing (2nd mortgages) can exist.  Subordinate lien holders must forgive liability.
5. Requires borrowers to share equity and future appreciation in the value of the property with the Federal Government.