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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. The Hope for Homeowners program is intended to provide homeowners with new, 30-year fixed rate mortgages insured by the Federal Housing Administration (FHA).
The program is effective from October 1, 2008 to September 30, 2011.
As many as 400,000 homeowners could avoid foreclosure through this program over the next three years. 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.
Program Features:
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Authorizes the FHA to insure up to $300 billion of 30 year fixed rate refinance loans up to 90% of appraised value for distressed borrowers.
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Covers mortgage commitments made on or after October 1, 2008 through September 30, 2011.
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Requires existing mortgage holders to accept the proceeds of the insured loan as payment in full for all pre-existing indebtedness.
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Participation in this program is not required but voluntary for lenders.
There are four ways that a distressed homeowner could pursue participation in the HOPE for Homeowners program:
1. Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program.
2. 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.
3. 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.
4. 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
Homeowners should contact their existing lender and/or a new lender to discuss how to qualify to become eligibility for this program. Homeowners may be eligible if you meet the following criteria:
- The home is your primary residence, and you have no ownership interest in any other residential property, including second homes, like a vacation home.
- Your existing mortgage was originated on or before January 1, 2008 and you have made at least 6 payments.
- You are not able to pay your existing mortgage without help.
- As of March 2008, your total monthly mortgage payments due were more than 31% of your gross monthly income.
- You certify that you have not been convicted of fraud in the past 10 years, intentionally defaulted on debts; and did not knowlingly or willingly provide material false information to obrtain an existing mortgage.
Who should I contact?
Contact your existing lender and/or a new lender to discuss how to qualify and their eligibility for this program. The FHA does not accept loan applications. You may also contact a housing counselor to learn more about your options.
How much can I borrow?
Your new H4H mortgage will be no more than 90% of the new appraised value of your home, with your lender basically writing down your current mortgage to that amount. NOTE: Your lender may choose NOT to write down your mortgage, in which case you would not be able to participate in the program.
What costs do I have to pay?
- The new mortgage, if approved, will replace all of the current mortgages on your home. You will not owe any payments, fees, or debts on mortgages.
- You must agree to share both the equity created at the beginning of this new mortgage and a portion of any future appreciation in the value of your home.
- In addition to an upfront mortgage insurance payment of 3%, you will pay a 1.5% annual mortgage insurance premium on your outstanding mortgage balance. This premium will be included in your monthly payments.
- You will need to pay any closing costs on the loan. You will receive a Good Faith Estimate of these costs.
Will my new interest rate be lower than my current rate?
The interest rate for the new mortgage will be based on current market interest rates and will be provided by the lender.
If needed, can I take out a second mortgage under this program?
No. You cannot take out a second mortgage for the first 5 years of the loan, except under certain circumstances for emergency repairs.
As of January 2009, the effectiveness of H4H program has been very poor. The program's success rate of helping homeowners modify loans to lower payments is reported to be dismal -- in the hundreds -- when the madate of the program was intended to help up to 60,000 homeowners in its first year of action.
A significant problem is due to the fact that lenders are not obligated to participate. Lender agreement to loan modification terms is entirely voluntary in this program. For the program to work as intended, lenders must be willing to accept buyouts of their loans that will provide the lender with 90% or less of the current appraised value of the home. This simply has not been happening. The tide may be turning as lenders are being overwhelmed on both political and financial fronts.
