FHAs Hope For Homeowners Still Waiting for Lender Participants

by Heindrick So
October 13th, 2008

The Federal Housing Administrations Hope for Homeowners program went into effect last week, but as of right now, there still isn’t a list of participating lenders yet.  While the program sounds great in theory, without any lender participation the legislation is almost meaningless.  

Why the cold feet?
When we covered this new program earlier this month, we predicted this “less-than-thrilled” response from lenders.  The program aims to help those with troubled mortgages and convert them into cheaper fixed rate traditional FHA mortgages, granted these participating lenders must be willing to write off part of the loan and suffer the initial loss. Specifically, the new FHA mortgages can be no more than 90 percent of the property’s new appraised value. 

Now, it’s not a total loss for the lenders as they do have their own incentives in place; which I cover below.  But have we come to a certain point in financial history where a U.S. Government insured program means nothing? True, the program is relatively new and we weren’t expecting lenders to “jump” at this program quite so soon.  In most cases however, this H4H program will save lenders more money rather than going through the expensive foreclosure process. 

Lender Incentive – Equity and Appreciation Sharing Revisited
As mentioned, there were some incentives in place to hopefully convince these lenders to write down these initial losses. In fact, without the equity and appreciating sharing incentive, lenders would just be gambling heavily once again with these troubled mortgages. 

Shared Equity -Since the loan is written for no more than 90% of the current appraised value, the borrower must agree to share portions of this equity with HUD. Percentages are based on a graduated time-table detailed here.

Shared Appreciation – Borrowers must share 50% of any appreciated value with HUD at the time of sale or refinance transaction.

The Lenders Incentive – HUD’s 50 percent appreciation interest is paid to prior mortgage lien holders in order of seniority. If all prior lien holders have been satisfied, HUD will retain any remaining balances.

You can find official statements regarding Equity and Appreciation Sharing straight from HUD at this website: HUD – Hope for Homeowners 

Hope for Homeowners Fact Sheet gives you a great summary as well.

So while there are incentives in place, investors still seem hesitant to make these loans. Again, without any lender participation, this legislation won’t mean much. In the meantime, the best thing you can do is contact your existing lender to see how you can qualify for the new Hope for Homeowners program. In addition, you can also check this website to see if they’ve updated the list of participating lenders (as of 10-13-08, no updates yet). For more of the eligibility guidelines, be sure to also check out our earlier post where we discuss all the details of this new FHA program.

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This entry was posted on Monday, October 13th, 2008 at 10:22 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

One Response to “FHAs Hope For Homeowners Still Waiting for Lender Participants”

  1. Al Estruch Says:

    Hello my name is Al Estruch and i would like to know what lenders are making this program HOPE
    work …There is a real need for this and NOW
    thank you

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