EXAMPLE OF HOW THE HOPE FOR HOMEOWNERS PLAN WORKS

Please ignore the accuracy of the numbers. This is an example only and is for information only.

Case: Joe and Jane Doe bought a house on July 2003.

INICIAL SITUATION (Back in 2003):

They paid for the house $300,000 with a 5/1 ARM (Interest Only for the first 12 months).
They put 0% down. They paid only closing cost.
The Monthly payment for the first 5 years was $1,500

The house was appraised for $500,000 in 2005 ( The top of the Housing Boom)
They took a Home Equity Line of credit for $100,000 ( $580 is the payment including principal and interest)

The payments were: $1,500 (Mortgage) + 580 ( HELOC) = $2,080

ACTUAL SITUATION ( October 2008)

The interest rate has adjusted and The house value has drop to $200,000.

The NEW payment of the existing mortgage now is $2,309 and the balance of the mortgage is $375,000

The actual payment is : $2,309 (Mortgage) + 580 ( HELOC) = $ 2,889

AFTER With a HOPE for HOMEOWNERS

Since the house is now worth just $200,000 the bank will originate a NEW FHA backed mortgage for $180,000 or 90% of the value.

The Doe needs to pay for closing cost and the down payment.

The Bank that holds the HELOC has to agree to forgive the remaining of the debt (Actually what the Banks do is agree with the FHA to get a cut of the profit from the house when the Doe sell or refinance their house)

The Bank that holds the mortgage agree to accept $200,000 for the $375,000 that is the amount of the mortgage ( This bank also will get a cut from the FHA when the Doe refinance or sell the home)

The new payment of the 30 Fixed FHA Backed Mortgage is $1,120 a month and the old Mortgage and HELOC are forgiven (or change to the new Mortgage)

As you see the Hope for Homeowners is a very good program. This can be the solution that many of us are looking for but the final word is the one of the lenders.

Many banks have not even heard about the program and for others is still better to take you to Foreclosure. This program is not very attractive for the banks because they lose big amount of money. But in the actual economic situation they are more flexible. If you qualify for other program that gets more money to the bank they will prefer that go for them.

The program can be hard to qualify. If you own 10% or have more as equity ( of the NEW market value of the house) you will need just the money for the closing cost. The bank can even finance them.
If you (like the Doe) were paying just interest , the value of your home drop to much (like many in Florida and other states) or if you bought in the top of the boom and don't have any equity you may need a good amount of cash.

There are many factors to consider with this or other of the government and the bank programs. You need to evaluate all the options that are available to you. Sometimes as painful as it is, going into Foreclosure is the best. If you find that Foreclosure is the best route be smart and try to protect your credit.

Since this and the other government programs are complicated please contact your Home Now Agency close to your home for guidance (You will see a list of them when you fill out the form). I will also contact you with one private agency that also can show you the programs that banks have and tell you to wich you qualify. Please compare all your options and decide which is better for your particular case.

There are many people in the same situation. The future is bright. We are going through a painful time but change is coming.
We will have a new government and it will have to promote a new economy that encourage spending from the middle class. And if they want us to spend they will have to provide us with credit to buy affordable homes, affordable health insurance, etc.

Don’t forget to Vote. Now more than ever how you vote will affect your economic future.