Its hard to imagine the stress you’d feel lying awake in the middle of the night, knowing that your mortgage payment was moving up beyond what you could afford, while your homes value has dropped enough so that you can’t refinance to a newer lower rate or fixed rate loan. Well part of all of government’s efforts to manage the mortgage market and credit market meltdown and save homeowners is a new program called Hope for HomeOwners.
Under the Hope for HomeOwners Program, if you are struggling with a mortgage and a home that is worth less than your current loan, this HUD program will help cover the costs of Refinancing your Home with a loan you can afford. Lenders will take a loss on the difference between the existing obligations and the new loan, which is set at 90 percent of current appraised value. Your lender will provide you with an affordable monthly mortgage payment through a loan modification rather than accepting the losses associated with declining property values, forclosures and liquidation.
It isn’t a slam dunk that you and your home are candidates for the Hope for HomeOwners program. You have to be generally straightforward and honest, and can’t be trying to cheat the system. Here’s what HUD is looking for
- The existing mortgage was originated on or before January 1, 2008;
- Existing mortgage payment(s) as of March 1, 2008 exceeds 31 percent of the borrowers gross monthly income;
- The homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been convicted of fraud in the last 10 years under Federal and state law; and
- The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced into the H4H mortgage.
What does the consumer get out of the deal: A new affordable mortgage, 10% equity (even if you were upside down) and best of all, you get to stay in your home. What does it cost? 3% up front for mortgage insurance, 1.5% per year for ongoing mortgage insurance, a limit on your ability to take out homeequity or additional loans, and an agreement with the government that you will share the profits if the market recovers and the home goes up in value.
All in all its a pretty good deal. Surprisingly enough, only about 1000 people applied from the programs inception in October 2008 through this writing in November.