“HOPE” act… Can a Short Refi be better than Short Sale?

Real Estate Sales Representative with The Lang Team - Keller Williams Realty

Well, again we need to ask ourselves how many times the government has tried to fix something only to have little effect or even make the situation worse?  Enter the "Hope for Homeowners act of 2008" (HUD refers to this as H4H).

 Realtors, how did your last Short Sale go?  It's a fair question because with the HOPE program we are asking the same loss mitigation departments to write-off the portion of the principal balance that is "upside down".  The only difference is that the end result will be a new loan at 90% LTV instead of the sale of the property.  Is there any reason to believe that loss mitigation will be any more willing to write-off the thousands of dollars needed for the benefit of a refinance as apposed to a sale?

 Another factor is that the lender will end up only about 85% of the current value of the property.  How is this?  Because it is a refinance with closing costs, and assuming the person in question qualifies for the HOPE refinance, they will most likely not have the $$ needed to pay for the closing costs & pre-paid items.  So a 90% LTV = 85% to the bank + approx 5% for closing costs.  Also, the Up-Front mortgage Insurance, which is currently 1.75% for a regular FHA loan, will be 3.00% for the HOPE loan!  The monthly mortgage insurance, which is normally .55% for a regular FHA loan, will be 1.5% for the HOPE loan! 

 I know there are a lot of people HOPEing this will be a solution to help our ailing housing market, I must at the very least be a skeptic.

 Details about HOPE for Homeownership act.

Posted by

David Lang

Keller Williams Fort Myers & the Islands





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