Hope for Homeowners?

The HOPE for Homeowners program (also known as "H4H") was created by Congress pursuant to the Economic and Housing Recovery Act of 2008, in order to help curb the increasing number of mortgage defaults and foreclosures throughout the country. I first learned of this program when a neighbor told me he had been contacted by a lawyer that offered to cut his mortgage by $100,000 essentially cutting his payment by over $1,000 a month. Being an attorney, I was instantly curious as to how this could happen as everyone else in the Las Vegas valley seemed to be getting foreclosed on and leaving their homes.

It turns out that effective from October 1, 2008 to September 30, 2011, as many as 400,000 homeowners could be helped by the HOPE program, which program allows families to refinance their current loan into a new fixed-rate loan with lower payments. The Government plans to shell out $300 billion for this program. The new loans are insured by HUD’s Federal Housing Administration (FHA) and provide another option for people who are having difficulty making their mortgage payments.

In addition to being able to refinance, the bank can "write off" or take a loss on the difference between the original loan amount and the new refinanced loan amount. This means my neighbor was correct in saying that his mortgage may be decreased by $100,000.

Now before anyone gets too excited about this program, you need to see if you qualify.

Consistent with other statutory requirements, borrowers must 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;
-They do not own a second home;
-Their mortgage debt-to-income must be at least 31 percent;
-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.
-Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.
-To participate, existing subordinate lenders must agree to release their outstanding mortgage liens.
-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.

This program is breath of fresh air for homeowners as we constantly hear about financial bailout programs for Wall Street and automakers for billions of dollars. Here in Nevada, the HOPE program has not caught on. As expected from the archaic financial industry, many banks were still waiting for further guidelines before doing anything to help those inquiring about this program. Large companies such as Countrywide are supposedly setting up their own departments to handle this new option for homeowners.

This program is exciting, but it is still contingent on the bank cooperating with the homeowner. The program is still too new to see how flexible banks and other mortgage companies will be when it comes down to their bottom line. If you want to read more about the HOPE for Homeowners program, you can access this link for further information.