HOPE for Homeowners will provide another resource to the Federal Housing Administration's (FHA) existing efforts to aid struggling homeowners. Under the program, borrowers having difficulty paying their mortgages will be eligible to refinance into FHA-insured mortgages they can afford.
For borrowers who refinance under HOPE for Homeowners, lenders will be required to "write down" the size of the mortgage to a maximum of 90 percent of the home's new appraised value. In many instances, lenders will determine that such a reduction in principal will allow them to avoid a costly foreclosure, while helping borrowers stay in their homes.
HUD strongly encourages borrowers to work with their current lender to determine if HOPE for Homeowners is the right program for them. Lenders should explore all options, including HOPE for Homeowners, before issuing foreclosure notices. For lenders, this voluntary program will serve as another loss mitigation tool that can be used to help families keep their homes.
Sustainable, Affordable Homeownership
HOPE for Homeowners will only offer 30-year fixed rate mortgages - so the borrower's last payment will be the same as the first payment. Further, this program will maintain FHA's long-standing requirement that new loans be based on a family's long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.
Consistent with statutory requirements, borrowers must also meet the following criteria:
The new HOPE for Homeowners mortgage payment must be at or below 31 percent of the borrower's income, unless there is "trial modification" period prior to loan application. A trial modification would give borrowers the opportunity to demonstrate their capacity and willingness to make a mortgage payment that does not exceed 38 percent of their monthly income.
Voluntary Lender Participation
Homeowners In Need Should Act Now
Content Archived: April 21, 2010