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FHA Hope for Homeowners (H4H) program - is it a false front?

After a frustrating week, I am coming to the Active Rain community - specifically the mortgage professionals - for feedback and direction.

I received a referral from a current Short-Sale client. During the initial meeting with the new clients, I learned:

the clients don't want to sell their home if there is any way to save it
their lender has agreed to a short-refinance as long as they got it from a different institution
they have only been late on their mortgage once and that was because their lender TOLD THEM TO in order to be considered a "hardship" - even though the true hardship could easily be established.
The buyers qualify to a "T" under the FHA "Hope" program (I was a mortgage lender for 20 years)

As would be true with any ethical realtor, I had no desire to list a home for sale if it wasn't the best option (or only remaining option to avoid foreclosure) for the client so I started dialing lenders. I first called the Big 5 (you know who they are). None of them offer the program and, frankly, some of the "corporate hooey" that I received was hysterical.

I then went to the HUD website and pulled the 42 page list of "participating lenders" and started calling them. Much to my surprise, even the "participating lenders" don't currently offer the program because there are NO INVESTORS FOR THE PROGRAM.

To add insult to injury, during the same week I read an article from the Secretary of HUD stating that the program is a dismal failure because lenders are unwilling to take the short-refi losses. How does the Secretary of HUD not know that it is impossible to find a lender who will actually DO the program?

Do any of YOU offer the program or know a reputable lender who does?

Posted by Wendy Cutrufelli, Contra Costa Realtor on 12/02/2008 08:02 PM

Comments (10)

FHA Hope for Homeowners in the Mortgage / Finance Channel

fha hope for homeowners, short refinance, short sale

This post has been included in California Information Contra Costa County, CA Information
Post is included in group: Realtors®

10 Comments on FHA Hope for Homeowners (H4H) program - is it a false front?

DEC

Is this just another government boondagle ........ what is going on?

Hi Michael, Exactly my question! If you visit the HUD website, it appears that they are helping millions of homoewners with this program. Why then cannot I not find a single lender able to offer it for homeowners that meet the program criteria perfectly? Definitely smells like boondogle.

Hi Wendy -

I work with Genworth Mortgage Insurance. We have a "work out" department that is extremely active in helping homeowners avoid foreclosure through many means including loan mods and short sales. As an MI provider we have tremendous incentive to help the work out go though and we work with just about every servicer in the country. Yes, the homeowner must have Genworth MI on their loan for us to get involved. So, please ask your customer if they have private mortgage insurance on their loan. If they do not, I am sorry that we will not be able to help in this case, but please always keep the MI question in mind as we are very active in helping families avoid foreclosure. And, we do this at no additional charge as it is part of the premium and is a primary borrower benefit of mortgage insurance. Hope this helps.

DEC

Hi Wendy,

I too have been trying to find a lender that will participate in the H4H program. After looking at the HUD website, it made it sound as though as long as you qualified it would be no problem. I called HUD and they pointed me to the information page and the page gives you an option to find the participating lenders. I have not been able to find one that does participate.

I was given a lead to a company who may offer it in early 2009. GMAC said they don't have all the particulars to be able to offer it - I just laughed.

I am looking for any insight, direction or help on this program.

Heidi

Steve,

If there is mortgage insurance, how do they find out who is the company?

Heidi

FEB

<www.hud.gov>www.fha.gov<U.S. Department of Housing and Urban Development
451 7th Street S.W., Washington, DC 20410
Telephone: (202) 708-1112 TTY: (202) 708-1455

HOPE for Homeowners

HOPE for Homeowners Overview Presentation

H4H Press Fact Sheet

H4H Press Release

H4H Consumer Fact Sheet

Consumer Disclosure

H4H Consumer FAQs

H4H Industry Fact Sheet

H4H Lender FAQs

Additional FAQ's

Examples of How Equity and Appreciation Are Shared

Mortgagee Letters and Exhibits

H4H Rules

Lender Registration Form

List of H4H Participating Lenders

Monthly Reports to Congress

NOTE: Homeowners, contact your existing lender and/or a new lender to discuss how you may qualify for the H4H program.

The HOPE for Homeowners (H4H) program was created by Congress to help those at risk of default and foreclosure refinance into more affordable, sustainable loans. H4H is an additional mortgage option designed to keep borrowers in their homes.

The program is effective from October 1, 2008 to September 30, 2011.

If you are having trouble making your mortgage payments, HOPE for Homeowners may be able to help you, by refinancing your loan into a new 30-year or 40-year fixed-rate loan with lower payments.

How the Program Works

There are four ways that a distressed homeowner could pursue participation in the HOPE for Homeowners program:

Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program.
Servicers working with troubled homeowners may determine that the best solution for avoiding foreclosure is to refinance the homeowner into a HOPE for Homeowners loan.
Originating lenders who are looking for ways to refinance potential customers out from under their high-cost loans and/or who are willing to work with servicers to assist distressed homeowners.
Counselors who are working with troubled homeowners and their lenders to reach a mutually agreeable solution for avoiding foreclosure.

It is envisioned that the primary way homeowners will initially participate in this program is through the servicing lender on their existing mortgage. Servicers that do not have an underwriting component to their mortgage operations will partner with an FHA-approved lender that does.

Step 1: Cost-Benefit Analysis

Lender considerations:

Given their fiduciary responsibilities and financial obligations, lenders will assess their portfolio and perform a cost-benefit analysis to determine the feasibility of offering this program to struggling homeowners.

Affordability versus value: lenders will take a loss on the difference between the existing obligations and the new loan, which is set at 96.5 percent of current appraised value. The lender may choose to provide homeowners with an affordable monthly mortgage payment through a loan modification rather than accepting the losses associated with declining property values.
Borrower eligibility: Lenders that determine the H4H program is a feasible and effective option for mitigating losses will assess the homeowner's eligibility for the program:

- The existing mortgage was originated on or before January 1, 2008;
- Existing mortgage payment(s) as of March 1, 2008 exceeds 31 percent of the borrowers gross monthly income for fixed-rate mortgages; For ARMs, the existing mortgage payment(s) exceeds 31 percent of the borrowers gross monthly income as of March 1, 2008 OR the date of the new loan application.
- The homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been convicted of fraud in the last 10 years under Federal and state law; and
- The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced into the H4H mortgage.

Consumer considerations:

The lender will disclose to the homeowner the benefits of the program:

Home retention,
New affordable mortgage based on current appraised value,
3.5 percent equity

The lender will also disclose to the homeowner the costs of the program:

3 percent upfront mortgage insurance premium and a 1.5 percent annual premium,
Equity and appreciation sharing with the Federal government, and
Prohibition against new junior liens against the property unless they are directly related to property maintenance.

Step 2: Negotiations Between Borrowers and Lien Holders

If the lender refinancing the loan does not hold the senior mortgage lien, it will need to secure an agreement from the existing lien holder to waive all prepayment penalties and default fees on the existing loan and accept the loan proceeds from the H4H loan as payment in full. The loan amount (including the 3 percent UFMIP) for the new H4H loan cannot exceed 96.5 percent of the current appraised value of the property.

The lender will engage existing subordinate mortgage lien holders to extinguish all subordinate liens on the subject property. To entice subordinate lien holders to participate in the negotiation process and release their liens, FHA has the authority to share its future appreciation entitlement with them or offer an upfront payment option.

Step 3: Originating an H4H Mortgage

The lender will qualify the homeowner for the new H4H mortgage using the guidelines established under the terms of the program's unique statutory requirements, ensuring the homeowner has the capacity to make the new payment on the H4H mortgage in a timely manner.

During underwriting of the loan, the lender will calculate the future appreciation interest amount or upfront payment for each subordinate lien holder in accordance with instructions provided by FHA.

At settlement, subordinate lien holders who choose the future appreciation share option 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.

Following funding of the loan the lender will record - in addition to the typical security instrument and note for the first mortgage - a shared equity note and mortgage (SEM) and a shared appreciation note and mortgage (SAM). These mortgages will be serviced by FHA.

The lender will also submit the new mortgage for insurance to FHA, certifying that it has been originated, underwritten and closed in accordance with the H4H program guidelines.

Step 4: Fulfilling H4H Mortgage Obligations

Upon sale of the property, the homeowner will use their sale proceeds to pay off the H4H mortgage as well as the shared equity and shared appreciation mortgages.

FHA will provide instructions to the settlement agents regarding subordinate lien holders who are entitled to a portion of any appreciation. The lien holder that previously held the highest priority will receive payment up to the full dollar amount of its interest, not to exceed the amount of available appreciation, and so on, until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

In instances where the homeowner failed to make the first payment on their new H4H mortgage, the H4H statute prevents FHA from paying claim benefits to anyone holding the mortgage.

To the person who chose to leave a comment on my Blog without providing a name:

While I appreciate that you went to the FHA website read the posted requirements for the program, at the time I wrote this Blog, no lenders were actually offering the program even though there was a 42 page "approved lender" list on the HUD website. I called the majority of the CA lenders and did not find a SINGLE LENDER who could actually DO the program.

APR

Hello Wendy,

I can identify to the T with your situation and frustration. I try to keep an inventory of 35 to 40 listings at any given time, obviously lately the percentage of short sales is higher that the long sales, and between those short sales you come to meet families who were victims of the predatory lenders, cases that still your heart and who's only solution the be able to keep their homes is trough a program like the FHA Hope for Homeowners, H4H. I did exactly the same you did, went to HUD and FHA websites downloaded the list of approved lenders and call every company on the list. I had several meetings with the Director of my closer office of FHA here in Orlando, FL and they even gave me the underwriting guidelines for the H4H loan, but were not able to guide me to a lender doing it. Recently one of my clients call a company based on New York "Lend America" and they told them they could do the program since their loans are insured by the Government but issued directly by Lend America.

I called and talk with one of the representataives, they send me the package and told me that as long as the lender holding the lien on the property (In this case Nations Star Mortgage) were willing to accept the program they will do it. Nations Star Mortgage did not want to honor the program or any other program under Obamas Stimulus Package. We went to step one again. The link to Lend America is http://www.lendamerica.com, you need to call since there is not enough information on the face page.

Also on my quest for information on the H4H I subscribe to the HUD and FHA newsletters. On a publication from HUD named FHA OUTLOOK they report under Single Family Operations for March 1-15 that there were 69 H4H applications for this period and 1 was insured. Link to the report http://www.hud.gov/offices/hsg/comp/rpts/ooe/olcurr.pdf , If there were 69 applications for this period somebody other than Lend America is doing the H4H program. I will keep rsearching until I find a lender to help my clients, there is not money involved in doing it and I will be loosing a listing but maybe I'll have a friend for life and the satisfaction of helping a family keep a roof over their heads is priceless.

Hope this information can help you in any way, you are not alone on your quest.

Sincerely,

Jose

APR

I am glad to have found this forum. I am a homeowner in South Florida, we qualify as per the guidlines for the program. I too have contacted HUD/FHA and the various companies that portray themselves as lenders. IT IS ALL A FRONT. I called HUD back and told them that FHA should at the very least screen the list of companies on that List. Or just admit the program as a failure and take down the list. You can't trust anyone these days. HSBC told me the same thing, we will do the short refi but I must find the outside lender. The List makes it look like SO many lenders are doing something but fact is nothing is being done at all. I contacted Lend America in Feb. Filled out the paperwork. Was told by a supervisor that all the applications are now being put into a file PENDING additional Legislation(SO WHEN IS that going to happen). I guess after Obama is finished with his spending agenda by 2010. Fed up, As a final resort I have contacted an Attorney and also Senator Bill Nelsons office. Bill Nelsons offices have mentioned that they are aware of the problem... (BUT) no promises and have promised to contact my Bank HSBC. and HUD(with their very good contacts) to see what can be done in my case. (HSBC only does six month fixes) I honestly have come to the realization that basically, those of us that qualify for this program and really want it are going to have to make this thing Public. TV, NEWS, RADIO. I am so sick of excuses. My loan orginated May of 2006. its been 3 years of hell. A person can only take so much. That is were the banks win.. They just wear us down.. until we just give up and let them foreclose. Its just sick, Banks get bailed out but then we get screwed.

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