Foreclosure Relief – HOPE for Homeownership

by Ross Hair on December 8, 2008
in Consumer Issues

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The Hope for Homeowners Act of 2008 is designed to provide mortgage relief for homeowners with mortgages that they can’t afford. The Act authorizes the Federal Housing Administration (FHA) to ensure up to an additional $300 billion of 30-year fixed rate refinance loans for homeowners to refinance out of their existing loans into FHA loans.
Here are some details of the Act:

Sustainable, Affordability Homeownership

Hope for Homeowners maintains FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. FHA only allows owner-occupants to be eligible for FHA-insured mortgages. Borrowers must also meet the following eligibility criteria:

  • Their mortgage must have originated on or before January 1, 2008;
  • Their mortgage debt-to-income must be at least 31 percent;
  • They cannot afford their current loan;
  • They did not intentionally miss mortgage payments; and
  • They do not own second homes.

Features of FHA-insured loans under the new program include:

  • 30-year, fixed rate mortgage;
  • Maximum 90 percent loan-to-value ratio;
  • No prepayment penalties;
  • $550,440 maximum mortgage amount;
  • Extinguishment of any subordinate liens; and
  • New home appraisals from FHA-approved appraisers.

HUD, Treasury, FDIC and the Federal Reserve will form the Congressionally-mandated Board of Directors and work together to establish additional program standards.

Voluntary Lender Participation

FHA will continue to offer lenders an alternative to foreclosing on borrowers. Lenders will be encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Funding

FHA will insure up to $300 billion in new loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac.

Program Timeline

The program will last from October 1, 2008 through September 30, 2011. Since September 2007.

About Ross Hair

Ross Hair is the Real Estate Advocate and President of Real Estate Investment Association.

 

 

 

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