Signed into law in July, the Federal Housing Administration’s HOPE for Homeowners

by on October 15, 2008

program began October 1. While it was debated for several months before being approved, it’s been a bit overshadowed by the $700 billion bailout bill. The program, which will offer 30-year fixed mortgages, will end on September 30, 2011. It’s expected that it will be a few weeks before consumers can take advantage of the program because banks just recently received the details. There is also some speculation on how many lenders will actually use of the program. To be eligible for the program, borrowers must meet the following qualifications as listed on the FHA website: Borrowers are encouraged to contact their lender to determine eligibility, but may be eligible if, among other factors:

The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.
Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments.
They are not able to pay their existing mortgage without help.
As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.
They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

HOPE for Homeowners also includes the following provisions:

The loan amount may not exceed a maximum of $550,440.
The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium.
The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.
The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
Existing subordinate lenders must release their outstanding mortgage liens.
Standard FHA policy regarding closing costs applies, and they may be:
- Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90 percent of the new appraised value of the home.
- Paid from the borrowers’ own assets.
- Paid by the servicing lender or third party (e.g., federal, state, or local program).
- Paid by the originating lender through premium pricing.
- The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
- The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.