Special offer

New FHA Program Offers HOPE to Homeowners!

By
Real Estate Broker/Owner with Straightline Group, Inc.

FHA Launches New Program to Help Lenders Refinance Troubled Loans

Carrie Bay | 10.03.08

The Federal Housing Administration (FHA) rolled out the new Hope for Homeowners (H4H) program on October 1. The program was created as part of the larger Economic Recovery Act of 2008 passed by Congress this summer, and is aimed to help struggling borrowers avoid foreclosure by refinancing into more affordable, sustainable, FHA-insured mortgages.

H4H lets lenders and servicers with homeowners at risk of default or foreclosure turn "beyond-their-means" home mortgages into new government-backed 30-year fixed rate loans with lower payments. FHA said that given their fiduciary responsibilities and financial obligations, lenders should assess their portfolio and perform a cost-benefit analysis to determine the feasibility of offering the program to struggling homeowners.

Lenders will take a loss on the difference between the original principal obligation and the new loan, which is set at 90 percent of the current appraised value. It may be a more valuable option for the lender to provide homeowners with an affordable monthly mortgage payment through a loan modification, rather than accepting the losses associated with declining property values under a new H4H loan. Participation in the program is up to individual lenders, but as the FHA points out, in many instances they may find it is less expensive than foreclosure and disposition of property. Upon participation in the program, the FHA will also give lenders an interest in FHA's share of any future appreciation in the property.

Lenders that determine the H4H program is a feasible and effective option for mitigating losses must assess the borrower's eligibility using the following criteria:

- The existing mortgage must have originated on or before January 1, 2008.
- Existing mortgage payment(s) as of March 1, 2008 must exceed 31 percent of the borrower's gross monthly income.
- 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.
- The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced.

Under the new program, FHA can insure up to $300 billion in mortgages. The Congressional Budget Office (CBO) estimates that the new H4H program will save at least 400,000 homeowners from foreclosure. The program is effective through September 30, 2011.

For FHA's full explanation of the Hope for Homeowners program, including Fact Sheets and FAQs, click here.

Who are you going to choose to work with during these times?

Our team at Silverstar Finance understands what's going to be involved in getting this process done efficiently.  As the banks start to get named, banks will be flooded with applicants and will likely be overwhelmed with the process.  Your clients, our clients, your friends and family, our friends and family need to have an ally with them to help them communicate with the bank effectively and get the documentation to the bank in a package that looks great and has them qualified. We all know that working directly with a bank can be frustrating and ineffective, and that's now even before this package hits the market place with full force. The sooner people inquire, the better off they will be.  Please consider sharing this email with your database.  Your friends, family, and clients are looking for answers and while this government idea may not be the very best solution for everyone, it's certainly a step in the right direction.

Silverstar Finance has been serving Southern California and most Western States for 10 years.  Refer to a company you can trust to do right by you and your clients.

Have a great week!

Kurtis Kooiman
Certified Mortgage Planner
Silverstar Finance, Inc.
(p) 714-892-1002
(f) 714-892-1092

Society of Financial Awareness
(p) 714-892-1002
(f) 714-892-1092

Comments (1)

Janna Scharf
Keller Williams Realty Coeur d'Alene - Coeur d'Alene, ID
Coeur d'Alene Idaho Real Estate Expert

What a catchy name, "Hope for Homeowners".  I haven't come across too many homeowners who are feeling very hopeful right now.  buyers either, for that matter.

Oct 06, 2008 07:14 PM