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Refinancing Your Home Under the Hope for Homeowners Program

The Bush administration just recently launched the Federal Housing Administration’s Hope for Homeowner program, passed on July 30th as part of the Housing and Economic Recovery Act of 2008. This program is designed to help curb the tide of foreclosures by allowing borrowers to refinance their homes into low, fixed-rate FHA loans.

To qualify for the H4H program, borrowers must have paid at least 6 payments on the current loan. The borrower must not have been convicted of fraud within the past 10 years, and they must certify that they did not provide any false information to get their original loan.

Additional requirements of the H4H Program:

  • Existing loans originated before 1/1/2008.
  • Borrower must prove they cannot afford their current loan.
  • The loan must be on a primary residence only. Borrowers are not allowed to have a second property (e.g., rental or 2nd home). Investment properties do not qualify for the H4H program.
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FHA Mortgage Rates dropped below conforming rates in 2008, but with the economy and inflation concerns, interest rates will likely increase soon. Refinance today and get a fixed rate guarantee for thirty years.

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  • Any non-occupying co-borrower must quit claim their interest in the property prior to the occupying borrower applying for the H4H program.
  • All existing lien holders must accept the short payoff as payment in full.
  • Existing lien holders must waive all pre-payment and late penalties.
  • Existing loans may have any payment type including, including conventional (prime, Alt-A, subprime), or government backed (FHA, VA, or Rural Development), fixed or adjustable rate mortgage. This includes interest-only and negative amortization loans.
  • New payment must be less than a fully indexed and fully amortized payment for the prior loan(s).
  • Tax transcripts must be ordered for 2 years for ALL loans to verify income, and the borrower must fully document employment.
  • Borrower must have a DTI for new loan at or below 31/43. Borrowers with a DTI up to 38/50 may qualify, but only if a 3-month trial modification period has been completed.
  • Borrowers must make at least 3 consecutive "trial modification" payments to the existing mortgage prior to application.
  • Trial Modification payments must be at least the amount of the full Principal, Interest, Taxes and Insurance (PITI) of the new H4H loan, which includes homeowner’s association dues, grounds rents, special assessments and all subordinate liens as of March 1, 2008.

In addition to the above criteria, loan underwriters are instructed to use Total Scorecard and other standard FHA guidelines for qualification. FHA does not have any FICO credit score requirements because they only insure mortgage loans. Lenders set the credit score requirements because they are the ones actually extending the loans.

H4H Shared Equity Mortgage (SEM)

Borrowers must also agree to share any equity that builds in their property in the event of a sale or refinance, as follows:

  • Year 1: 100% to FHA
  • Year 2: 90% to FHA
  • Year 3: 80% to FHA
  • Year 4: 70% to FHA
  • Year 5: 60% to FHA
  • After Year 5: 50% to FHA

Even if the borrower pays off the FHA loan altogether, if they sell the house they must adhere to the equity-sharing plan.

 

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All FHA mortgage products are provided by FHA Home Loan Services, which may arrange loans with third party providers. FHA Home Loan Services is national mortgage lender. Not everyone will qualify for a government insured mortgage. FHA Home Loan Services cannot guarantee all loans will be made or whether all loan applications will be approved by the investing bank.
This is not a commitment for a FHA house loan or an advertisement for credit as defined by paragraph 226.24 of regulation Z.
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