Page about FHA and the Recovery Act from my February e-newsletter.

Below is a page from our monthly e-newsletter that is automatically sent to our clients. If you or someone that you know would like to receive this newsletter filled with information on the real estate market, please call or email me or Marcie Purcell.

FHA Mortgage Rescue Program

Part of the Housing and Economic Recovery Act of 2008, passed in July 2008, includes provisions to help struggling homeowners replace their mortgages with 30-year fixed-rate loans backed by the Federal Housing Authority (FHA). Available from October 1, 2008 through September 30, 2011, the Hope for Homeowners program is designed to help homeowners who can no longer afford their monthly mortgage payments and have mortgages that exceed the market value of their homes.

How Hope Works
Hope for Homeowners funding is capped at $300 billion worth of loans with the following provisions:

• The program is entirely voluntary. Lenders will decide whether to participate in the program and which (if any) homeowners they help.
  
  
• The existing lender of the original mortgage must write off a portion of the existing loan for the homeowner to take part in the program. In addition, the lender must agree to pay a 3% FHA loan-origination fee in exchange for an FHA guarantee on the loan.
  
  
• If the homeowner currently has a second mortgage, the second mortgage lender must agree to forgive the entire debt. This is done through negotiation with the first lien holder.
  
  
• The FHA loan cannot exceed 90% of the home's current appraised value, verified by an FHA-approved appraiser. The maximum mortgage amount may not be more than $550,440.
  
  
• The property must be owner-occupied -- no investors or investment properties will qualify. Homeowners with second homes are not eligible.
  
  
• To qualify, homeowners must be spending more than 31% of their gross monthly incomes (as of March 1, 2008) on their mortgage payment (including principal, interest, taxes and insurance) on loans that were written before January 2, 2008. (Income must be verified by lenders through the IRS.)
  
  
• Homeowners may be current on their home loan payments or in default, but must prove that they cannot continue to make the payment on their existing mortgage. In addition, they must certify, under penalty of law, that they have not intentionally defaulted on their loan to qualify for the program.
  
  
• Borrowers will pay FHA an upfront premium of 3% of the original mortgage amount and an annual mortgage insurance premium (tax-deductible with limits) of 1.5% of the outstanding mortgage amount.
  
  
• The FHA will insure the new loans and agree to pay off the lenders if borrowers default.
  
  
• Homeowners must agree to share any future appreciation and equity on the property with the federal government upon sale or refinancing. Homeowners can only retain equity gains based on a sliding scale, with zero equity retainable from a sale/refinance in the first year (100% going to FHA). The homeowners share in equity would rise 10% in each succeeding year up to the fifth year and after (until the home is sold), when the homeowner's share of any capital gain would be 50%, FHA's share 50%.
  
  

Find Out More
More information about the Hope for Homeowners program is available online at www.HUD.gov (type "Hope for Homeowners" in the search window) or by calling (800) 225-5342. Both resources also offer information about the FHASecure program -- a program designed to help qualified homeowners who may be facing foreclosure due to an interest rate increase on their mortgage.