The government bail out of the housing crisis has created wonderfully conceived programs to keep homeowners in their homes with re-negotiated mortgages or refinanced mortgages.  The specific programs for the home saving legislation are the HOPE for Homeowners (H4H) and FHASecure programs.

I spoke about these programs in my recent blog articles NUTSHELL VERSION - EMERGENCY ECONOMIC STABILIZATION ACT and YOUR Ticket to Normalcy? THE BAILOUT BILL.

The H4H program is a voluntary program for lenders.  Essentially for the lender with a non-performing loan (ie: a mortgage about to go into or already in foreclosure) the effect is potentially better than a short sale solution to avoiding foreclosure expenses.  In a short sale, the lender gets all of the net sale proceeds and has the option to seek the difference (the shortage) from the borrower.  In a H4H program refinance, instead of selling the home, the owner is refinanced with an FHASecure mortgage.  The advantage to the foreclosing lender is that it will get about 85% of the current appraised value of the house, but that amount is all it will get and it cannot later seek the shortage against the borrower.  As a sweetener, the foreclosing lender will participate with the government (FHASecure) if there is any "appreciation" realized upon the later sale or refinance of the borrower's home.

Great deal you may think - but there is a Catch-22.  The whole concept hinges on the participation of lenders to fund the FHASecure program of FHA insured mortgages to these borrowers - and not a single lender in the nation has stepped up to the plate to make the first loan.  The FHA website merely says, "List of Participating Lenders Coming Soon".

One would think that since this program was announced over two months ago to be effective October 1^st, that the participating lenders would already be there to start taking applications - but no, homeowners who are to be served by this program have found that so far it is an empty shell of well meaning and promising regulations.

For the homeowner then, the short sale is the primary vehicle available to personally mitigate the loan liability situation, which adds inventory to the available housing list and thus drives prices down as supply further exceeds demand.

Loss mitigation through the borrower lender allowing the borrower to stay in the home and writing down the loan as would be the case under the H4H program, is a event that we seldom see in our daily lender discussions and negotiations.  This is not to say it does not exist, but it is an exceptional event unless there are factors involved that go to lender misconduct or other technical issues regarding the origination or servicing of the loan.

So until the lenders begin participation in the H4H program and FHASecure, the hype and glory emanating from our governmental finance gurus is just an empty bag.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660  RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide!  Shortsales@Florida-Counsel.com  New Website www.Florida-Counsel.com