"Hope for Homeowners" is a short-sale refinance intended to allow distressed homeowners keep owner occupied homes from going into foreclosure. There are a lot of moving parts to this bill and the homeowners will have to agree to an equity share for five years after they refinance into this loan. The mortgage holders are NOT required to participate in the program.
Basic principles are:
•· Principal residence only.
•· Borrowers certify that they did not intentionally default on the mortgage for the purpose of obtaining the HOPE loan.
•· Borrowers mortgage debt-to-income ratio (including all existing mortgages) as of March 31, 2008 must be 31% or higher (this is also known as the front ratio).
•· Calculation of the new loan will be based on the borrower's ability to make mortgage payments determined by FHA or other underwriting standards AND the loan-to-value limited to 90% of the appraised value.
•· The existing lien holder must waive any prepayment penalties and fees.
•· The existing lien holders must agree to accept the proceeds as payment in full of all indebtedness under the hope loan; and all encumbrances must be removed.
•· Those lien holders of existing subordinate mortgages will be entitled to future appreciation of the property. Standards and policies of the shared appreciation will be developed by FHA.
•· The new term may not be for less than 30 years and the rate must be a fixed rate.
•· The new loan amount cannot exceed $550,400 which is 132% of FHLMC loan limit established in 2007.
•· The borrowers cannot put a new second lien on the property for 5 years after the refinance takes place.
•· Income must be documented by income tax returns for the most recent two years.
•· The borrower cannot have convicted of mortgage fraud under Federal or State law during the past 10 years.
•· The borrower must supply documentation to prove that they only own this one residence. If they own other properties, they cannot utilize this program
•· No one can unduly influence an appraiser in connection with this mortgage.
•· MIP - a 3% UFMIP will be included in the mortgage being financed, through a reduction of the amount of indebtedness that existed on the loan being refinanced and will be paid to HUD, additionally the annual mortgage insurance premium will be 1.5% of the loan amount.
•· The interest rates and origination fees will be determined by the new Federal Housing Finance Agency, but will be comparable to market rates.
•· Equity Appreciation - upon sale or disposition of the property or subsequent refinance there will be shared equity on a graduated scale.
a) Sale or refinance within one year entitles HUD to 100% of the equity appreciation.
b) Sale or refinance within more than one year and less than two years entitles HUD to 90% of the equity appreciation.
c) Sale or refinance within more than two years and less than three years entitles HUD to 80% of the equity appreciation.
d) Sale or refinance within more than three years and less than four years entitles HUD to 70% of the equity appreciation.
e) Sale or refinance within more than four years and less than five years entitles HUD to 60% of the equity appreciation.
f) Sale or refinance within year five entitles HUD to 50% of the equity appreciation.
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