HOPE for Homeowners is organized and run by the Federal Housing Administration or FHA, which is part of the United States Department of Housing and Urban Development. The FHA is the largest government insurer of mortgages. If homeowners default on their loans, the FHA will pay the lenders. The FHA’s HOPE for Homeowner’s Program is a voluntary program.
Hope for Homeowners, or H4H, was implemented in October 2008 and runs through Sept. 30, 2011. The goal of the program is to provide help for struggling homeowners who can no longer afford their mortgages. The program is designed for borrowers who are near default and foreclosure on their loans. It gives them the opportunity to refinance to a mortgage insured by the Federal Housing Administration. Both the borrower and mortgage lender must agree to participate in the program.
The HOPE for Homeowners program provide borrowers with a new, 30-year, fixed-rate mortgage. This helps homeowners refinance their mortgages at more affordable rates. The new loan has a maximum ratio to the value of your home of 90 percent. The value of your home is appraised by an FHA-approved appraiser. There are no prepayment penalties through the program and all subordinate liens are erased. However, any lenders with loans on your home must agree to participate in the program.
FHA evaluates a family’s long-term ability to repay the mortgage before approving it for the program. Hope for Homeowners also has a number of other eligibility factors. A homeowner’s mortgage must have existed on or before Jan. 1, 2008 in order to qualify for the program. The mortgage debt to income ratio must be at least 31 percent and the homeowner must not be able to afford his current loan. The FHA must determine that a homeowner has not intentionally missed mortgage payments and that the homeowner does not own a second home.
The new mortgage approved by the FHA will replace any previous mortgages on your home. You will owe nothing on the previous mortgages. You agree to share the equity created at the beginning of the new mortgage and any appreciation on your home with the FHA. If your new home is worth $200,000 and your mortgage is only $180,000, then your equity is $20,000. The amount the FHA is responsible for and the amount you are responsible for depends on when you sell or refinance your home. You can find a table to determine the amount at hud.gov. You also must pay an upfront mortgage insurance payment of 3 percent and a 1.5 percent annual premium. Finally, you must pay closing costs on the loan.
You cannot take out a second mortgage for the first five years of the loan through the HOPE for Homeowners program. The only exception is under certain circumstances for emergency repairs. You cannot apply for the program through the FHA, but the agency has a list of approved lenders on its website. If you have filed for bankruptcy, you should contact the person handling your bankruptcy before applying for the H4H program.