OK, I am going to make some assumptions as to what may happen in relation to the Hope for Homeowners (H4H) vs. a negotiated adjustment in a current mortgage.

For this exercise, let's assume the following:

•1.       Home was purchased in October 2006 on a 2 year ARM

•2.       Price of home was $200,000

•3.       No Down Payment - Current balance is $196,850

•4.       Initial Interest rate is 8.5%

•5.       P&I is $1,537.83

•6.       Index is 6 month Libor - Currently at 4.02%

•7.       Margin is 6.7%

•8.       Current value of home is $180,000 (10% decrease in value)

•9.       Current FHA Hope interest rate is 7% (but who knows, I sure don't)

•10.   Rate increase next month will go to 10.5%

•11.   Payment goes to $1,800.66 or about $263 more per month

Under the Hope program, the payoff on the current mortgage would be negotiated to $162,000 including the UFMIP and closing costs. This would also mean waiving all collections costs and late fees. That means the payment would be:

•·         $1,077.79 P&I

•·         $    202.50 MI

•·         $1,280.29 w/o Taxes and Insurance

Again, making an assumption, let's say the lender is willing to negotiate a new interest rate good for 5 years at 7% (I don't know if they would do that, but I need a place to start.) For this example, let's say the lender is not willing to waive any principal but is willing to waive all late charges and collection fees.

                $1,309.65 per month P&I

If I were the lender, I would be very willing to make that adjustment. Trust me when I say this is all just a WAG (wild assed guess). But it seems to me that this is a workable solution. The homeowner gets the payment they can live with and the chance to recover the value in their home. The mortgage holder gets a new chance to recover what is actually owed on the property and everyone is happy, maybe.

One thing for certain, anyone that got a stated income loan originally, can't get a H4H loan in the future. I have read over the fact sheets and keep coming up with more questions than answers. For instance, it talks about shared equity mortgage (SEM) and about FHA sharing the equity when a property is sold or refinanced with subordinate mortgage holders. I am not sure that means the original lien holder or not and if it doesn't then they have very little reason to participate. However, if it is a lender with an 80/20, then there is plenty of reason to participate.

There is still no word when there will be a list of participating lenders. It is pretty certain that my company won't be a participating lender, however, we could still broker the loan if one of the big companies was. I will try to keep everyone informed as I know more.

I have said before that I have hope for Hope but I really think the chance of a negotiated program holds a lot of hope too.