Hope for Homeowners Program Announcement
REMARKS PREPARED FOR
STEVE PRESTON, SECRETARY OF HOUSING AND URBAN DEVELOPMENT
WEDNESDAY, OCTOBER 1, 2008
Good morning. Thank you all for coming.
Today, I want to discuss continued actions undertaken by the Department of Housing and Urban Development (HUD) to help homeowners. I am pleased to announce implementation of the HOPE for Homeowners program to provide additional mortgage assistance for homeowners at risk of foreclosure. This program will help struggling families refinance their current mortgage with a new affordable mortgage insured by the Federal Housing Administration (FHA).
The advantage of an FHA loan is obvious: a government insured loan with the last payment same as the first.
This program starts today and ends September 30, 2011. The HOPE for Homeowners program was passed by Congress and signed by the President at the end of July. The legislation allows FHA to kick off the program no earlier than October 1.
We wanted the program implemented by October 1. We moved quickly. Many said it couldn't be done. We knew it would be tough.
- We needed extensive coordination with other federal agencies.
- Our teams needed to reprogram and expand systems and hire staff.
Well, we did it.
I thank everyone involved for their hard work and dedication. I especially want to thank all of the HOPE for Homeowners Board designees including Brian Montgomery, the FHA Commissioner; Phil Swagel, Treasury's Assistant Secretary for Economic Policy; Governor Betsy Duke from the Federal Reserve Board; and the Director of FDIC, Tom Curry, for their public service to the nation during these trying times.
This program is one more tool in the toolbox for homeowners and lenders. It is yet one more way that families may be helped to weather the current turbulence in the housing market. For the past two years, HUD has offered other ways to help homeowners find the right mortgage and stay in their homes. FHASecure is what we call our refinancing program.
We expanded it in August 2007 and again this summer to include certain delinquent borrowers. We estimate that by the end of the year, we will have helped 500,000 homeowners refinance into a fixed-rate FHA issued mortgage since that initial expansion.
HOPE for Homeowners, which we are launching today, is a further expansion in our ability to refinance homeowners who cannot afford to retain their homes. To participate, people must meet the eligibility criteria. Banks will also have to ensure that the resulting loan leaves equity in the home and is affordable for the homeowner.
The primary way homeowners will participate in the program is through the servicing lender on their existing mortgage. The program is available only to owner occupants and will only offer 30-year fixed rate mortgages. The new loan cannot exceed 90 percent of the new appraised value of the home. Lenders may have to write down the existing loan in exchange for avoiding an even costlier foreclosure.
Clearly, lenders have many other ways to modify a loan to make it more affordable before significant principle write-downs, so Hope for Homeowners may not be the preferred route in many situations.
Borrowers may be eligible if, among other factors:
- The loan amount may not exceed a maximum of $550,440.
- The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium.
- The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.
- The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
- The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
- Existing subordinate lenders must release their outstanding mortgage liens.
There will be a chance for you to discuss this program with Commissioner Montgomery and representatives from the designated departments and agencies immediately after this press conference.
This is a new product for homeowners and lenders. It provides new possibilities to help homeowners. For homeowners in trouble, this may be the help they need. I strongly encourage homeowners and lenders to look into this program and other FHA products without delay.
I would also like to say something about the context for this announcement. Clearly this week, we are faced with significant decisions regarding how we begin to right our financial system following the devastating effects of the mortgage and housing markets. I cannot emphasize enough how the decisions we make this week will affect every American whether it be their ability to get a mortgage, their ability to afford retirement or their ability to get a job. We are dealing with the fundamental ability of our economy to function effectively.
I believe we should be mindful of all this as we proceed ahead. The HOPE for Homeowners program is another helpful step forward. But it must be part of a larger vision for the future, a vision that will help Americans keep their homes and remain financially secure.
Again, thank you all for coming.
Read the news release