Basic Facts for Lenders about the HOPE for Homeowners Program

What is the HOPE for Homeowners Program?

HOPE for Homeowners (H4H) is a program designed to assist borrowers at risk of default or foreclosure in refinancing to an affordable 30-year or 40-year fixed rate FHA loan. The program is effective October 1, 2008 and will conclude on September 30, 2011.
 

Which Lenders are eligible to participate?

All approved FHA mortgagees are eligible to originate mortgages under the H4H program. All lender participation is voluntary.

Borrower eligibility

Borrowers may be eligible if (among other factors):

• The home to be refinanced is a 1-,2-3-, or 4-unit primary residence, and the borrower has no ownership interest in any other residential real estate.

• The existing mortgage was originated on or before January 1, 2008, and the borrower has made at least 6 payments on it.

• Their monthly mortgage payments exceed 31% of their gross income:

 For fixed-rate mortgages, as of March 1, 2008
 For ARMs, as of March 1, 2008 OR at the time of the loan application

• They are unable to pay his/her existing mortgage(s) without help.

• They must certify that they have not been convicted of fraud in the past 10 years or intentionally defaulted on their debts, and that they did not willingly provide material false information to obtain their existing mortgage(s)

Borrowers may be current or delinquent on their existing mortgage(s).

How does the program work?

The process is similar to the current FHA application process with the following additions:

The loan amount may not exceed a nationwide maximum of $550,440 for one unit properties, $704,682 for two-units, $851,796 for three-units, and $1,058,574 for four-units.

The new mortgage will be no more than 96.5% of the new appraised value including any financed UFMIP with the lender essentially writing down the current mortgage to that amount.

Upfront MIP is 3% and the monthly MIP is 1.5%

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 H4H 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

1) financed into the new loan provided the LTV does not exceed 96.5% including UFMIP,
2) paid from the borrowers own assets,
3) paid by the servicing lender or third party (e.g., Federal, state, or local program), or
4) may be paid by the originating lender through premium pricing.

The borrower 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 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.