HUD Launches Hope For Homeowners Mortgage Program

by Peter G. Miller
October 2nd, 2008

HUD has released the general standards for the newly-minted “Hope for Homeowners” program created under the FHA reform bill passed by Congress during the summer.

For those with an interest in FHA mortgages — and for those who now have toxic loans — the program has great potential, enough funding to underwrite 400,000 borrowers.

That’s the good news. The bad news is this: To participate in the program your lender must be willing to write off part of the loan and pay money to Uncle Sam. You can pretty much guess that a lot of lenders will not be thrilled with this notion, especially holders of second liens who are likely to lose much or all of their investment.

The HUD announcement somehow fails to mention that the Bush Administration threatened to veto the bill or that the measure was passed on a bipartisan basis.

The full HUD announcement is below:

WASHINGTON — The Bush Administration today unveiled additional mortgage assistance for homeowners at risk of foreclosure. The HOPE for Homeowners Program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA).

“For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford,” said HUD Secretary Steve Preston. “FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners’ ability to retain their homes. We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them.”

The HOPE for Homeowners program was authorized by the Economic and Housing Recovery Act of 2008. Since the President signed this vital legislation into law on July 30, 2008, the HOPE for Homeowners Board of Directors has worked diligently to develop and implement the program as directed by Congress. The Board was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.

The HOPE for Homeowners program begins today and ends September 30, 2011. The program is available only to owner occupants and will offer 30-year fixed rate mortgages – so the borrower’s last payment will be the same as the first payment. In many cases, to avoid what would be an even costlier foreclosure, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home.

Borrower Eligibility

Borrowers are encouraged to contact their lender to determine eligibility, but may be eligible if, among other factors:

___The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.

___Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments.

___They are not able to pay their existing mortgage without help.

___As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.

___They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

How the HOPE for Homeowners program works

“HOPE for Homeowners will add to HUD’s existing efforts to make FHA refinancing available to homeowners who need it most,” said FHA Commissioner Brian D. Montgomery. “One year ago, FHA expanded refinancing into its FHASecure program. Since that time, we have helped more than 360,000 families keep their homes by refinancing with FHA, and we will assist a total of 500,000 families by the end of this year.”

The Board expects that the primary way homeowners will participate in the program is by working with their current lender. HOPE for Homeowners will serve as another loss mitigation tool available to distressed borrowers.

HOPE for Homeowners also includes the following provisions:

___The loan amount may not exceed a maximum of $550,440.

___The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium.

___The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.

___The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.

___The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.

___Existing subordinate lenders must release their outstanding mortgage liens.

Standard FHA policy regarding closing costs applies, and they may be:

___Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90 percent of the new appraised value of the home.

___Paid from the borrowers’ own assets.

___Paid by the servicing lender or third party (e.g., federal, state, or local program).

___Paid by the originating lender through premium pricing.

___The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.

___The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.

The lender will disclose to the homeowner the benefits of the program including home retention, a new affordable mortgage based on the current appraised value, and 10 percent equity. The lender will also explain the prohibition against new junior liens against the property unless directly related to property maintenance, and a minimum of 50 percent equity and appreciation sharing with the Federal government.

The costs to the homeowner include the upfront and annual insurance premiums, as well as a share of the equity created by the write-down associated with the HOPE for Homeowners mortgage and any future appreciation in the value of the home. At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD’s appreciation share.

If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

The HOPE for Homeowners Board of Directors includes HUD Secretary Steve Preston, Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and FDIC Chairman Sheila Bair. They have named the following people to serve on the board as their designees: FHA Commissioner and Chairman of the Board Brian Montgomery, Federal Reserve Board Governor Elizabeth Duke, Treasury Assistant Secretary for Economic Policy Phillip Swagel, and Federal Deposit Insurance Corporation Director Tom Curry.

Read more about HOPE for Homeowners at HUD’s website.

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15 Responses to “HUD Launches Hope For Homeowners Mortgage Program”

  1. Marc Brinitzer Says:

    Peter,

    Once again, a plan is put forth to help homeowner’s with a wink to the banks that says “hey, this makes us look good but you don’t have to play if you don’t want.”

    The acid test will come now that we have nationalized Fannie/Freddie & Indy Mac and we ARE the bank. Will we follow our own suggetions and actually give these people some help?

  2. wanda Fain Says:

    I would like to find a lender in or near lawrenceville Ga (atlanta)That participates in the program. please help.

  3. Karen Says:

    You stated that your lender must be willing to take a loss on the difference between the existing obligations and the new loan. My husband and I have been trying to refinance our home at a lower interest rate – we currently pay 11.125% – since March – due to the fact that I have become disabled – and have had no luck. Where may we stand now that our lender is no longer operating?

    Any information or insight you may have would be greatly appreciated.

  4. joyce Says:

    i need a lender hfh in pgh

  5. David Cass Says:

    We have 2 mortgages, we can pay the 2nd mortgage, I call and asked them for a lower rate and they said NO this is citibank, my 1st mortage is with WAMU and Im bearly makeing that payment, we are in the real estate market and are drowning, Citibank sent a letter to foreclose on our property what can we do?

  6. Tillman Says:

    I think the program was a great idea, but I see no evidence that it is being utilized. My lender Litton is apprently not participating and told me I would have to find an FHA approved lender and apply for a loan with them. But it’s not that easy right? I am having a very hard time finding a lender that is participating in this program. What should we do, who should we contact to benefit from this prgram? It seems unreachable!

  7. Brenda Hunt Says:

    I need the help of the home secure program but have not been able to find a lender. The lenders do not return phone calls and if you get to speak to them, they are not knowledgeable of the program and do not seem interested. My currentlender is willing to lower my payments but with a nother high interest loan that increases my debt load. It is just another predatory loan. They are of no help. They have been bailed out and are laughing all the way to the bank. There seems to be no help for homeowners. The program is all talk and no action. I wish some one would come to the rescue. Please tell me of any banks that are willing to help.

  8. Andrea Says:

    The problem I see with this is that a lot of people are foreclosing on their home because of a dramatic decrease in property values. The property value has decreased due to foreclosures and empty houses in the area, meanwhile they still have a much higher mortgage balance on a house that is worth 30-70% of the loan value. This is the situation I am currently in. My house value is 50% of the remaining balance of the mortgage loan. There are empty houses in my neighborhood and crime has increased so my neighborhood is no longer safe. This program does not help me (or people like me) who want out because I am current on my loan and my monthly mortgage payment is only about 17% of my monthly gross income. If they drop the income guideline, I would be eligible for this program. I would apply because who wants to pay years on a loan for property that is only worth half the amount?

  9. roosevelt Says:

    flagstar bank is actually doing these FHA loans, but it is on the retail side, I am a loan agent,and we cant do them for you guys, you must contatc the lender directly….

    here ya go… Contact cynthia.terry@flagstar.com or reach her @ 925-580-2802… I hope this works for you, I would really like to do it but, its a retail product

  10. Al Harrington Says:

    You guys seem quick to bash the banks for loans that you signed up for.
    I work at a bank that is doing these types of loans, the only problem is going to be getting the current lender to “eat” the difference. Forget about the lender that is going to write the loan.
    Brenda, If your lender is willing to help you out and eliminate debt, they are doing it for a reason. Maybe your debt to income ratio is too high and the new loan would be saving you money overall. Don’t call them predatory. If the loan wasn’t benefitting you then they would not be able to write the loan by law.
    David,
    Of course you can pay the second mortgage, its probably less than half of what your first mortgage payment is. LET IT GO. A second mortgage is worthless and in most cases its Unsecured debt because your house isn’t worth what you owe on it. Lenders will sometimes settle these for pennies on the dollar. They want them off the books. Focus on paying the first.
    Andrea, I feel bad for you. You make money, you purchased a house that you can afford, you make your payments on time and nobody wants to help you out and make your situation better. Nice guys finish last.

  11. John Says:

    I don’t see how this program is going to benefit me in any way shape or form!

    Lets say my house is appraised at 300K, and my first is a 30 year fixed at 5.25%, payments of 1,521.00 month. My income on March 1 2008 was 4,268$ /month, 31% of that is 1,323.38$ so I technically qualify on my 1st alone…

    I also have a 2nd at 5.24% (variable at present) at about 70K, and my interest only payments are 306.94$ year.

    total I owe: 1st 206K, 2nd 70K = 276K
    Appraised value 300K

    Loan to value = 0.92 or 92%

    So if I refinance to H4H I get totally ripped off of half my future equity, in addition to the OUTRAGEOUS PMI FEES!!!

    First of all they want 3% PMI up front or 9,000.$$ just in PMI FEES!!! THAT IS INSANE, A RIP_OFF!!!

    Also they want 1.5% a year, or about 4,500 = 375.00$ per month!! HELLO!!! THAT IS ALSO INSANE!

    I currently pay 84$ per month for PMI, and I could probably get out of that if I had an appraisal done, by an honest appraiser, not a mortgage company(PMI biased) appraiser.

    Then they want 50% of my Equity????????????

    I am Irish and this sounds like the english stealing land from the irish all over again…

    DO NOT SIGN UP FOR THIS PROGRAM!!!!

    just my opinion, it is a horrible ripoff.

    Who is it helping???? Certainly not me, I can guarantee you that.

    John in Seattle , WA

  12. Maria Says:

    Dear John…
    I don’t think you are actually the target homeowner of this program, so shouldn’t be that upset about it. It may be a ripoff for you, but only because you don’t actually need it.
    You are talking about your already 8% equity in your house, not too bad DTI ratio… Why do you want this H4H loan, if you have a great loan that only asks for 84 dollar as insurance? This is not for you…
    Just so you know your situation is not bad, so please don’t whine….
    We have a 1st morgage for 240K, 1915/mo, a 2nd 62K for 500/mo, and our house worth 180K dollars. Haha..
    I would love to pay 375 dollars for MI… Mortgage Insurance/month (not PMI, P means private, and this is not private but the goverment…….) on a loan that actually worth the same as my house. And yes, I wouldn’t care if I had to pay 50% of the gained equity of the house after the pull me out 100K woth of sh.it.
    So please stop whining. This is not for you, get over it.

  13. JASAM FOREVER Says:

    wow, its a great program, but my payment would be actually the same as on my upside down interst only loan, they will have me at 7.5, in turn for not perfect credit, So if H4H interst rates are so high where your payment would be about the same as what you pay now, then i dont see where the relief is, as far as the monthly payments

  14. joe and lisa Says:

    We had a 30 yr. fixed w/countrywide in 6/2006, 11 months later we walked in payment & were looking to refinance. To our surprise we were approx. 8k behind in escrow acc.[current with all payments at this time]countrywide failed to inform us that the monthly amount had increased an additional 600 plus penalties due to property evaluation that occured 6 months prior to our walk in visit. Since then our property has been reassessed to half the amount of orignal price of purchase. Countrywide has not credited us for the overcharges or penalties which was over 6 months ago.

  15. lmwilker Says:

    My husband was unemployed for 5 1/2 months and Citibank let us pay a smaller amount on our mortgage during this time. However, when my husband found a job it paid about $15,000.00 a year less a year. We owe $44,000.00 on a $69,900.00 loan which we have paid on for 14 years. I have been employed at the same place since 1996. When my husband found a job we tried to get Citibank to lower our interest rate from 7.8% to 5% which would have meant our payment would have gone from over $700.00 a month to about $400.00 a month but Citibank flat-out refused. They said after my husband had been in his new position a year (he was in his old position for 20 years) he could try again for a modification.

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