The Bush Administration announced the launch of the so-called “Hope for Homeowners” program today aimed at helping more at-risk borrowers stay in their homes.
The program, initially approved back in July, will allow borrowers struggling to keep up with monthly mortgage payments refinance into sustainable 30-year fixed-rate mortgages, so long as the loan amount doesn’t exceed $550,440.
It is only available for owner-occupied properties who do not own any other properties, such as second homes or investment properties, and the new mortgage must not exceed 90 percent loan-to-value of the new appraised value.
Additionally, the borrower must be able to prove that their current mortgage is unaffordable, and as of March 2008, their total monthly mortgage payment must have exceeded 31 percent of their gross monthly income (debt-to-income ratio).
In order to be eligible, the existing mortgage must have been originated on or before January 1, 2008, and six payments must have been already been made.
Borrowers convicted of fraud in the past 10 years, or those who have intentionally defaulted on their debts or provided materially false information to obtain their mortgage will not be able to utilize the program.
The holder of the existing mortgage must agree to waive all prepayment penalties and late fees, and any subordinate mortgage lenders must release their outstanding liens.
The borrower must also agree to share any home equity and future appreciation with the FHA and/or the original lien holders.
The program will serve as a type of loss mitigation option for lenders looking to recoup losses on underwater borrowers, though it’s unclear how many homeowners will be interested in salvaging such a loss instead of just starting over.
The Hope for Homeowners program will be available until September 30, 2011, and complements HUD’s other homeowner outreach program, FHASecure.