LEGAL TIP OF THE MONTH
NEW FEDERAL LEGISLATION TO HELP HOMEOWNERS. WHAT'S IT ALL ABOUT?
President Bush has signed into law legislation that will allow HUD's Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA's efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program will be implemented on October 1, 2008. it is slated to end on September 30, 2011.
WHAT IF MY CLIENT IS ALREADY FACING FORECLOSURE AND CAN'T WAIT UNTIL OCTOBER? Right now, homeowners can determine if they are already eligible for mortgage assistance through FHASecure, FHA's existing refinancing program. They can obtain information through any of the following options:
- Contact a local, HUD-approved housing counseling agency at HUD.gov;
- Contact the HOPE NOW Alliance at (888) 995-HOPE; or
- Call FHA at (800) CALL-FHA.
WHO IS ELIGIBLE FOR THE HOPE FOR HOMEOWNERS PROGRAM?
FHA only allows owner-occupants to be eligible for FHA-insured mortgages. Borrowers must also meet the following eligibility criteria:
- Their mortgage must have originated on or before January 1, 2008;
- Their mortgage debt-to-income must be at least 31 percent;
- They cannot afford their current loan;
- They did not intentionally miss mortgage payments; and
- They do not own second homes.
WHAT ARE THE FEATURES OF THE HOPE FOR HOMEOWNER'S LOAN?
- 30-year, fixed rate mortgage;
- Maximum 90 percent loan-to-value ratio;
- No prepayment penalties;
- $550,440 maximum mortgage amount;
- Extinguishment of any subordinate liens; and
- New home appraisals from FHA-approved appraisers.
ARE LENDERS REQUIRED TO PARTICIPATE? No. The program is not mandatory. Lenders, however, are encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property because, in most cases, the reductions in principle will cost lenders less than the losses associated with foreclosure.
If you know someone who might benefit from this information, please pass it on.
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