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The initial intent of the Hope for Homeowner’s program was to help alleviate the market from escalating foreclosures, help to maintain property values, mitigate the leveraging (a topic to be discussed later) of assets, allow more homeowners to keep their home, and to help stabilize the national real estate market.

Well, it just didn’t quite work as hoped. I won’t get into the details of the inefficiency of govt. and how they participated in the creation of the current situation. I will commend them on actually realizing that the program didn’t work as initially implemented and for making adjustments to the program to help ensure that it provides a means to help some homeowners.  In a nut shell, the basic changes include raising the loan to value of the property (LTV) from 90% to 96.6% for some of the loans, allowing the terms to be stretched to 40 years, and by making it easier for second lien holders to get payments. This last adjustment should help break-up the log jam because it removes an obstacle to moving the process along.

“Clearly, meaningful changes were needed. These modifications should increase lender participation and help more families who are having difficulty paying their existing mortgages, but can afford a new affordable loan insured by HUD’s Federal Housing Administration,” said Preston.

Consistent with statutory and regulatory requirements, borrowers must continue to meet the following criteria:

• Their mortgage must have originated on or before January 1, 2008.
• They cannot afford their current loan.
• They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments.
• The loan amount may not exceed a maximum of $550,440.
• 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.
• They do not own a second home.
• They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years.
• They must follow FHA’s long-standing and strict policy of fully documented income and employment.

Even though the LTV to can be raised 96%, there is still a requirement that the monthly debt ratios must be within 31% for the mortgage and 43% for the total household gross income. Despite the debt ratio requirements, this should extend the availability of funds to more families. By raising the LTV ratio, this will reduce the current gap between the existing loan balance and the new Hope for Homeowners loan amount. This will help the current note holder by reducing their exposure to loss. There will be room for higher debt loads by maintaining the original 90% LTV and allowing up to 50% debt ratios in some cases. There will no longer be a trial modification period. This will lessen the complications inherent in the original measure.

Second lien holders will benefit from the changes by receiving immediate payments for releasing their liens. This will help to expedite the process for more homeowners to participate. By guaranteeing payments to the second lien holders, they should be more willing to participate in moving the program forward.

Please feel free to contact me regarding the changing Austin, TX Hope for Homeowners guidelines.

TX – Austin
Custom Mtg Group
512-821-1185