a synopsis of the hope program in the new bill

[moh malekpour]

The section of the new bill, which is called hope now, or foreclosure rescue is going to be in effect on Oct. 1, 2008 to keep folks with sub prime loans in their homes and since it is going to be an FHA refinancing, there is going to be an small hope for appraisers to get some assignments for those loans at the time that the appraisal activity is at its lowest level.

The designated budget for this rescue plan is $300 billion and is going to expire on Sept 30, 2011. Although the budget is huge and the time for the project is 3 years but I think most homeowners are not going to be qualified because of very difficult conditions for the qualification.

The following is a synopsis of the hope program:

1- the lenders of those sub prime loans have to voluntarily agree to write down principal and penalty fees on those loans before a homeowner can apply for the FHA hope loan. For example if the loan amount is $500,000 and the current appraised value of the home is $300,000; the lender has to agree to write down or forgive $200,000 and then the home will be refinanced by FHA at 90% of the appraised value with a conventional fixed rate loan . Lenders are saying that they are going to participate but when it comes to a real act, they might not to do it. If they agreed to participate in this program, they will require an appraisal on the property and upon that appraised or current market value, they are going to take their loss. They might to get a drive by appraisal before participating on this program to find out if it is in their advantage to participate in hope loan or let it go even if ends up to a foreclosure. The lender who is going to do the new FHA refinancing is not going to be the lender who made the original sub prime loan on that home. I don't know which lender is going to order for the appraisal of the property, the lender who is going to originate the new hope loan or the lender who is going to take the loss and let the homeower get the new FHA Loan.

2-homeowners must be current in their mortgages. If they are already foreclosed, it is too late to save them.

3-they must demonstrate the lack of capacity to pay their current payment. If they are not still able to pay for the new FHA loan, they cannot be helped.

4- their mortgage payment to their income ratio must be 35% or more. For example, if their income is $4000 per month, their monthly mortgage has to be $1400 or more. If it is less than $1400, they cannot get the hope loan.

5-they have to pay upfront insurance fee of 3% of new loan amount payable out of new financing proceeds.

6- they have to certify to the government that they haven’t intentionally defaulted on their current loan or any other debt in order to refinance with hope loan, anyone who lies in the application will be subject to 5 years jail.

7-they have to agree to occupy and live in the refinanced home as a principal residence and not own any other home.

8-they have to agree to share the appreciated profit or any equity gain with HUD upon the sale of that property.

9-since the FHA loan is at 90% of the appraised value, the new refinancing creates 10% equity for the homeowner instantly at the time of refinancing but homeowners cannot tap on that equity right away. If that home was sold in the first year, that 10% equity has to be paid back to FHA in full. If the home was sold within next 5 years, 50% of equity built up or appreciation has to be paid to FHA.

10-I guess, the original loan must be originated prior to Jan. 2008

 

[hglenbetts]

Just curious, if FHA is "refinancing" 90% of current value, is that other 10% tacked onto the original lender's loss from value decline or is it majic equity??

Also, in the recapture of the future equity, does the original lender that took the loss at the refi receive any of the future gain or just HUD??


And a recap... you state the home owner must be current on the existing mortgage AND demonstrate the INABILITY to pay that same mortgage??

And how can they have "Proceeds" from which to finance the 3% insurance fee??

This legislation is starting to sound like it was written by politicians m2:m2:

 

[hglenbetts]

One other thing

These loans were sold by lenders to investors, I presume, so who is it that is going to agree to take the write down?? The members of the local union whose leadership invested their retirement funds into these notes??:icon_cry: :icon_sad::new_usa: Buy American

 

[tjcou812]

2-homeowners must be current in their mortgage. If they are already foreclosed, it is too late to save them.

How can a homeowner be current on an existing home mortgage if they are in foreclosure??? I thought this bill was to help homeowners who are going into or already in the process of being foreclosed upon. Foreclosure process usually dosn't begin until the homeowner is 3 or 4 months behind in making mortgage payments.

 

[moh malekpour]

Just curious, if FHA is "refinancing" 90% of current value, is that other 10% tacked onto the original lender's loss from value decline or is it majic equity??

No,
If the original loan is $300,000 and current appraised value is $200,000, the original lender has to write down $100,000 and let the borrower to apply for the new FHA Loan. The original lender at this stage is done and has nothing else to do with this homeowner or the new refinance . The HUD is going to issue a fresh FHA loan in the amount of $180,000 and let the homeowner to start paying monthly payments of that new loan. So, if the market value of home is $200,000 and the only loan on it which is an FHA fixed rate loan is $180,000, the homeowner is going to have $20,000 equity on that home immediately. It is not too bad for the homeowner who was short on his equity before this loan and is going to be ahead by FHA refinancing.

. Also, in the recapture of the future equity, does the original lender that took the loss at the refi receive any of the future gain or just HUD??

The original lender doesn’t get any share of equity or appreciation. They all go to HUD

And how can they have "Proceeds" from which to finance the 3% insurance fee??

They finance it like any other FHA loan insurance financing. When the borrower has no money to pay upfront for loan insurance, they are going to add that amount to the loan amount in this case 90% of the value and finance it but that money goes into the insurance account. All FHA financings require upfront insurance. They are either paid by the borrower upfront in cash or financed and put it away in an insurance account.

 

[moh malekpour]

These loans were sold by lenders to investors, I presume, so who is it that is going to agree to take the write down?? The members of the local union whose leadership invested their retirement funds into these notes??:icon_cry: :icon_sad::new_usa: Buy American

Servicers are going to do them. The same servicers who are collecting the payments or sending default notices and doing foreclosures on those loan are going to do the write downs. I think they are going to evaluate the situation to find out which way to go if the homeowner is at the verge of foreclosure. Is it in their advantage to participate and take the loss and let the FHA to refinance or let the property to go to foreclosure. Some experts say, sometimes it is in the lenders advantage to write down the loss. If they don't do that, it takes them at least to foreclose the property and sell it in REO sale and may be with less value and more loss.
Those banks that made thos loans and sold them to investors are usually serving those loans now. Banks like B of A, wells, Wamu

 

[Bama Bayou]

They should call this thing The Tan Man Bailout Bill. Oh, wait, B of A already did that.

 

[moh malekpour]

How can a homeowner be current on an existing home mortgage if they are in foreclosure??? I thought this bill was to help homeowners who are going into or already in the process of being foreclosed upon. Foreclosure process usually dosn't begin until the homeowner is 3 or 4 months behind in making mortgage payments.

The official foreclosure is when the property is auctioned and or transferred to the lender or mortgage holder. sending default notices to borrowers and giving them 3-4 moths or more to pay their loans is not foreclosure yet. It is just a notice or warning and still is considered current. When the property is auctioned or transferred to the lender, it is over and the homeowner is out of luck even if he or she could be qualified for FHA loan.

 

[Elliott]

The "Hope Program" reminds me of FEMA, I live in an area that had a
hurricane, FEMA set up couselors, I don't particularly remember anybody
waiting in line, I have not heard of anyone getting anything from them.
But rest assured it employed a bunch of civil servants and some of the
motels, restaurants, and rental car companies made something if they
agreed to the gov't procurement schedule.

So it sounds more like a full employment bill for civil servants.

 

[Mike Boyd]

The "Hope Program" reminds me of FEMA, I live in an area that had a
hurricane, FEMA set up couselors, I don't particularly remember anybody
waiting in line, I have not heard of anyone getting anything from them.
But rest assured it employed a bunch of civil servants and some of the
motels, restaurants, and rental car companies made something if they
agreed to the gov't procurement schedule.

So it sounds more like a full employment bill for civil servants.

A hurricane in Nevada?