Hope for Homeowners...What is it?

Hope for Homeowners is HUDs response to the foreclosure problem. While it's far from perfect, it is a start in what needs to be a more aggressive solution by all lenders to address this problem.
The basic idea is that HUD will insure FHA financing up to 90% of the current value of your home IF (and that's a big if) your current lender is willing to reduce your payoff and forgive the balance of your debt. Essentially it's a short refinance but the problem is that this is optional for lenders and most lenders won't help you unless you are in default.

SIDE NOTE: One reoccurring theme you will notice is that if you are one of the few that is not in default, you are essential punished by the lender because they will not even listen to you or try to help you out. Even if you can prove that you are in trouble and are just barely getting by in this economy, if you are not defaulting, the lender will do nothing proactive to keep it that way.

OK, so back to H4H.

Here is a list of what you need to know:
· Property must be owner occupied
· Your mortgage must have originated on or before January 1, 2008
· Your mortgage debt-to-income ratio must be over 31%
· You CANNOT be on title to any other property
· You did not "intentionally" miss mortgage payments

And here is the catch, you still have to actually qualify for an FHA loan AND participate in Equity Sharing. You can contact me to see if you can qualify for an FHA loan (or any loan for that matter) but let me breakdown how the equity sharing works:

Examples of How Equity and Appreciation Are Shared

Let’s say your home appraised for $200,000 at the time you receive your FHA mortgage. So your mortgage is 90% of this, or $180,000. The initial equity is the difference between 1 and 2, or $20,000.

In this example, you and the FHA share this $20,000 when you sell your home or refinance your loan.

Here’s how that $20,000 would be split:

If you sell or refinance:
Year 1 FHA gets 100%, or $20,000.......You receive 0%, or $0
Year 2 FHA gets 90%, or $18,000........You receive 10%, or $2,000
Year 3 FHA gets 80%, or $16,000........You receive 20%, or $4,000
Year 4 FHA gets 70%, or $14,000........You receive 30%, or $6,000
Year 5 FHA gets 60%, or $12,000........You receive 40%, or $8,000
After Year 5 FHA gets 50%, or $10,000...........You receive 50%, or $10,000

So, if you sell or refinance right after receiving the new loan, the FHA keeps the equity that was created, and you don’t receive any of it. On the other hand, let’s assume you stay in this loan and don’t sell or refinance for ten years. At that point, you’re entitled to half of the equity – in this example, that’s $10,000 – and the FHA is entitled to the other half.

In addition to this equity sharing, you will have to share any future home price appreciation with the FHA. This means that, if your home has gone up in value between the time you receive your FHA mortgage and the time of your home sale (or other disposition), you will share the amount of this increase with the FHA (less closing costs and a portion of any improvements you have made).

This is a 50/50 split that does not change over time.

But what if the value of your home continues to go down?

Because the appreciation is actually negative (the home has depreciated), so there is nothing of financial value to share, neither you nor the FHA would receive anything.

To keep it simple, these examples assume that there are no closing costs when you sell your home and that you have made no improvements to your home.

Again, keep in mind that these are just examples, and your actual experience will vary depending on factors such as: How much your home is worth when you get a new HOPE for Homeowners loan, how long you stay in your home, and how much your home is worth when you sell.