HOPE for Homeowners Can Help
You've heard the news, you've read reports, Congress and everyone seems to be talking about Hope for Homeowners, but how does it HELP?
The program, which was enacted by Congress is geared to help homeowners who are at risk of falling past due and going into foreclosure. The goal is to refinance these at risk loans into more stable, fixed rate products that are affordable for homeowners.
This program began October 1, 2008 and will run through September 30, 2011.
Preiminary estimates have shown that as many as a half-million homeowners could benefit from the Hope for Homeowners initiative, but how does it work?
There are basically four ways for homeowners to work with the program:
- Homeowners can contact their existing lender or a new lender (such as me) to discuss how to qualify and determine eligibility for the program. * YES, you need to qualify and be eligible *
- Loan servicing companies, those that collect the mortgage payment but who do not own the loan can work with homeowners to arrive that a solution to best help at avoid foreclosure is to refinance their loan into a Hope for Homeowners loan.
- Originating lenders (such as me) can assist homeowners work with their servicing company to qualify for the program.
- Counselors can assist homeowners contact their servicer to qualify for Hope for Homeowners to avoid foreclosure.
Remember, I mentioned that you must "qualify" and be "eligible" for one of these new loans, so what are the requirements?
Here is what lenders, such as myself will look in considering a distressed homeowner for this program.
1) Affordability versus Value. Simply put the lenders will be taking a "loss" on the difference between the current mortgages and the new loan, which is set to be 90% of appraised value. Lenders can also choose to work with a modification scenario (which I can HELP YOU WITH), instead of the a new loan and I will talk about the Pros & Cons of both later in this entry.
2) Borrower eligibility. We have to determine that the Hope for Homeowners program is a workable solution for the homeowner, since the lender will be taking a loss, the borrower has to be eligible:
* The existing loan had to be taken out before January 1, 2008
* Existing mortgage payment, as of March 1, 2008 has to be more than 31% of gross income
* The homeowner did not intentially default, does NOT have an ownership interest in other residential real estate and has not been convicted of fraud within the last 10 years under Federal and State low, AND
* The homeowner did not provide materially false information (ie. stated income or liars loan), to obtain the mortgage being refinanced into the Hope for Homeowners mortgage.
Here are what consumers need to consider when reviewing this option, as possible benefits.
1) Home retention (keeping the property)
2) New affordable mortgage based on current appraised value
3) At least 10% equity going into the program
Lenders have to make known to you that when you are eligible for the program, you will also be the following costs:
1) 3% upfront mortgage insurance, of the loan balance, and 1.5% annual mortgage insurance premiums.
2) Equity and Appreciation - your new partner is the Federal Government (thats right, when you take out a Hope for Homeowners mortgage, the Federal Government will share YOUR equity and appreciation with you in exchange for "bailing" you out.
3) You will NOT be able to get 2nd mortgages or junior liens against the home unless they are directly related to property maintenance.
The following steps in the process have to do with negotiations between the borrower and the existing lien holders, note owners, the originating or starting of the new loan process, the discussion of the Shared Equity Note & Mortgage and the Shared Appreciation Note & Mortgage.
If at some point in the future the homeowner decides to SELL or REFINANCE the property, they will share a portion of those proceeds as directed by their NOTE and agreement.
In the event that the homeowner "defaults" on the Hope for Homeowner mortgage, you will sign a note indicating that the lender will not be "paid"monies to the owner of the mortgage.
Overall, the Hope for Homeowners mortgage is a good deal if you truly want to keep your home and you qualify. To do so, you will have to share some of your future equity as a cost to making this arrangement, otherwise you can CALL me to discuss Loan Modifications to your mortgage, which often times can do the same thing but with the expense of the Hope for Homeowner mortgage costs.
The price you will pay for an attorney based Loan Modification service is FAR less than the 3% upfront and the 1.5% of the loan annually, those are costs you have to pay in addition to SHARING your equity with the Feds.
Do you need assistance? Have questions? Contact me for your personalized consultation.
