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Small Changes on H4H Program Could Have a big Impact

Through the Housing and Economic Recovery Act of 2008, Congress created the Hope for Homeowners ("H4H") program to help reduce foreclosures. Key parts of Section 124 of this program have been modified that could help make the program more appealing to borrowers and lenders alike.

For borrowers, the H4H board can now increase the maximum loan to value (LTV) of H4H loans. Currently, the LTV is 90%, which doesn't include the Upfront Mortgage Insurance Premium (UFMIP) of 3%. This effectively brings the LTV down to 87% if the borrower finances the premium, which could disqualify many homeowners whose homes have sharply decreased in value to the point where they are now upside down on their loans. Another key component that could make this attractive to borrowers is that the maximum loan amount is $550,400 nationwide. This puts the program in reach of a larger number of borrowers.

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A major barrier to this program is that lenders have to voluntarily write the loan down to 90% LTV in order to participate. Plus, there can't be any second liens on the house, which means that 2nd mortgage lenders typically will have to voluntarily take a 100% loss on their loans. Now, the H4H board can allow payments to prior lenders in lieu of participation in the Shared Appreciation Mortgage (SAM). This would allow lenders to recover up to 12% of their write-off. The only down side is that the lender must wait until the home is sold before attempting to recover the write-off, no matter how long it takes to sell the home.

While these changes aren't dealmakers, they are a step in the right direction. They could be enough to encourage some lenders to volunteer to make the loans.


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