The HOPE for Homeowners program, a part of the Housing and Economic Recovery Act of 2008, allows the Federal Housing Administration (FHA) to provide targeted assistance to certain borrowers facing difficulty with their mortgages.
If the homeowner qualifies, and if the current lenders agree, the homeowner may be eligible for a partial write-down of their mortgage debt and a new fixed-rate FHA insured loan for up to 87% of the current appraised value. (90% minus 3% Origination Fee)
In regards to the difference between the new proposed loan amount and the actual mortgage, HOPE for Homeowners has a requirement for Equity Sharing that will affect the customer when/if the property is sold or is refinanced. It also has Shared Appreciation which will be owed to FHA when the property is sold. Therefore, we believe other workout options may be in the best interest of the customer long-term.
The homeowner must share with FHA the initial equity at the start of the new mortgage. Initial equity is defined by FHA as "the difference between the appraised value of the home at the time of the new FHA loan and the original balance on the FHA mortgage." The newly created equity will be shared with FHA (if the home is sold or refinanced) as follows:
· During year 1 = 100% of initial equity to FHA/HUD
· During year 2 = 90% of initial equity to FHA/HUD and 10% to customer
· During year 3 = 80% of initial equity to FHA/HUD and 20% to customer
· During year 4 = 70% of initial equity to FHA/HUD and 30% to customer
· During year 5 = 60% of initial equity to FHA/HUD and 40% to customer
• After year 5 = 50% of initial equity to FHA/HUD and 50% to customer.
The equity sharing is used to reimburse the Treasury for the HOPE for Homeowners program costs on a declining basis. This is a one-time payment at time of sale or refinance.
Visit www.buyandclose.com/hope for more detals about this program and its Eligibility Requirements