Bush administration launches HOPE for Homeowners programMortgagePress.comGeorge W. Bush, HUD, HOPE for Homeowners, foreclosures, FHA, Steve Preston, FHASecure
The Bush Administration has 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.
"I want to commend FHA Commissioner Brian Montgomery and his
team at HUD, working with staff at the Federal Reserve, Treasury
and the FDIC, for quickly developing the initial regulations and
guidelines to implement the HOPE for Homeowners program," said
Mortgage Bankers Association Chief Operating Officer John A.
Courson. "HOPE for Homeowners will provide lenders with another
important tool to help keep families in their homes. Nobody wins
when a home goes to foreclosure. This program will help the
government, lenders and homeowners work together to avoid that
end."
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 three 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.
For more information, visit www.hud.gov.
