HOPE is a new FHA program and it expands on its predecessor, the FHA Secure program.  This is voluntary on the part of homeowners and existing loan holders to insure refinanced loans for distressed borrowers to support the long-term market stability, and sustain homeownership.

It will allow homeowners to avoid foreclosure by reducing the principle balance outstanding, and interest rate charged, on their existing mortgages. This of course depends on the mortgagor’s to agree to take less on what is owed on the existing mortgages. The alternative for the note holders for not agreeing to the reduction of the loan is more of the same for the bank, an ever-expanding home inventory. 

It will help to stabilize and provide confidence in mortgage markets by bringing transparency to the value of assets based on mortgage assets. Congress has authorized FHA to carry out its expanded role under the HOPE for Homeowners Program and has provided the following guidelines to determine eligibility.

The program criteria to modify loan terms with a fixed rate would have to be the primary residence and the housing cost would have to exceed 31% of income (as the bill was written, all though this could be changed later). Income has to be verified with the last two years income tax returns from the IRS. The loan could not be for more then 90% of appraised value and all pre-payments and penalties (no more then 90 days late for delinquencies) and fees related to default would have to be waived or forgiven. The principle obligation loan amount can be up to 132% of the principle limit established in 2007 under section 305 of FHLM for the property of that size.

Terms of the new loan can only be a fixed rate and with a length not less than 30 years. Interest Rates and reasonable origination and closing costs are allowed. Secondary loans cannot be taken out for the first five years unless it is necessary to maintain the property, but cannot exceed 95% of the loan to value. There will be an increase in the upfront fees for Mortgage Insurance Premium of 3% of the original principal balance and the annual fee will be 1.5% on the new loan.

Extinguishments of subordinate liens shall be required to accept in full the proceeds of the insured loans and remove all indebtedness under the eligible mortgage, and all encumbrances related to such eligible mortgage shall be removed. In exchange for removal of the subordinate financing the owner agrees in writing, allowing re-payment to a shared appreciation of future value upon refinance or sales of the secured property. This is a voluntary program on the part of the lenders and borrowers.

For the first five years if the property were to be sold or refinanced the Secretary and mortgagor would receive a prorated amount of the future equity value proceeds from the sale or refinancing of the loan. This is the prorated structure if before one year 100%, after one year 90%, year two 80%, year three 70%, year four 60% and year five through the remainder of the loan would receive 50%. Congress has established $300 Billion dollars to help distressed homeowners keep their house.

This is a summary of this portion of this bill and does not discuss all of the aspects of the bills subject matter. This is a good program to assist homeowners to get out of foreclosures and delinquencies with a fair and equitable program. This will help stabilize the housing market in those areas that are hardest hit by the number of foreclosures, by not increasing the number of vacant homes. E-mail me to see if you can qualify for the new HOPE Program @ john.lefrancois@dalusa.com.