The law left the details of the program to a board of directors that includes members from HUD, Treasury, the Fed, and the FDIC.
The program is available only to owner-occupants. It will offer 30-year fixed rate mortgages. Borrowers are generally eligible if:
- 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, have not intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).
HUD expects that most homeowners who participate in the program will do so by working with their current lender. The program includes the following ground rules:
- 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 3.0 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 mortgagee 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. Closing costs 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., a 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.
Equity Sharing
If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.
FHA Commissioner Brian D. Montgomery said that HOPE for Homeowners will add to HUD’s existing FHA refinancing options, including FHASecure, which FHA expanded a year ago. “Since that time,” Montgomery said, “we have helped more than 360,000 families keep their homes by refinancing with FHA, and we will assist a total of 500,000 families by the end of this year.”
Although HUD met the statute’s October 1 start-date requirement, adjustments may have to be made to reflect the bailout/rescue bill.
