| FHA Loan Programs |
Homeowners, contact your existing lender and/or a
new lender to discuss how you may qualify for the
H4H program.
The list of participating lenders is not available yet. We
will publish it in the coming days.
The HOPE for Homeowners (H4H) program was
created by Congress to help those at risk of default
and foreclosure refinance into more affordable,
sustainable loans. H4H is an additional mortgage
option designed to keep borrowers in their homes.
The program is effective from October 1, 2008 to
September 30, 2011.
As many as 400,000 homeowners could avoid
foreclosure through this program over the next three
years. If you are having trouble making your
mortgage payments, HOPE for Homeowners may be
able to help you, by refinancing your loan into a new
30-year fixed rate loan with lower payments.
How the Program Works
There are four ways that a distressed homeowner
could pursue participation in the HOPE for
Homeowners program
Homeowners may contact their existing lender and/or
a new lender to discuss how to qualify and their
eligibility for this program.
Servicers working with troubled homeowners may
determine that the best solution for avoiding
foreclosure is to refinance the homeowner into a
HOPE for Homeowners loan.
Originating lenders who are looking for ways to
refinance potential customers out from under their
high-cost loans and/or who are willing to work with
servicers to assist distressed homeowners.
Counselors who are working with troubled
homeowners and their lenders to reach a mutually
agreeable solution for avoiding foreclosure.
It is envisioned that the primary way homeowners will
initially participate in this program is through the
servicing lender on their existing mortgage. Servicers
that do not have an underwriting component to their
mortgage operations will partner with an FHA-
approved lender that does.
Step 1: Cost-Benefit Analysis
Lender considerations:
Given their fiduciary responsibilities and financial
obligations, lenders will assess their portfolio and
perform a cost-benefit analysis to determine the
feasibility of offering this program to struggling
homeowners.
Affordability versus value: 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. The lender may choose to provide
homeowners with an affordable monthly mortgage
payment through a loan modification rather than
accepting the losses associated with declining
property values.
Borrower eligibility: Lenders that determine the H4H
program is a feasible and effective option for
mitigating losses will assess the homeowner’s
eligibility for the program:
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.
Consumer considerations:
The lender will disclose to the homeowner the benefits
of the program:
Home retention,
New affordable mortgage based on current appraised
value,
10 percent equity
The lender will also disclose to the homeowner the
costs of the program:
3 percent upfront mortgage insurance premium and a
1.5 percent annual premium,
Equity and appreciation sharing with the Federal
government, and
Prohibition against new junior liens against the
property unless they are directly related to property
maintenance.
Step 2: Negotiations Between Borrowers and Lien
Holders
If the lender refinancing the loan does not hold the
senior mortgage lien, it will need to secure an
agreement from the existing lien holder to waive all
prepayment penalties and default fees on the existing
loan and accept the loan proceeds from the H4H loan
as payment in full. The loan amount (including the 3
percent UFMIP) for the new H4H loan cannot exceed
90 percent of the current appraised value of the
property.
The lender will engage existing subordinate mortgage
lien holders to extinguish all subordinate liens on the
subject property. To entice subordinate lien holders
to participate in the negotiation process and release
their liens, FHA has the authority to share its future
appreciation entitlement with them.
Step 3: Originating an H4H Mortgage
The lender will qualify the homeowner for the new
H4H mortgage using the guidelines established under
the terms of the program’s unique statutory
requirements, ensuring the homeowner has the
capacity to make the new payment on the H4H
mortgage in a timely manner.
During underwriting of the loan, the lender will
calculate the future appreciation interest amount for
each subordinate lien holder in accordance with
instructions provided by FHA.
At settlement, subordinate lien holders will receive a
certificate that evidences their interest as an obligation
backed by HUD, with payment conditional on the value
of HUD’s appreciation share.
Following funding of the loan the lender will record –
in addition to the typical security instrument and note
for the first mortgage – a shared equity note and
mortgage (SEM) and a shared appreciation note and
mortgage (SAM). These mortgages will be serviced by
FHA.
The lender will also submit the new mortgage for
insurance to FHA, certifying that it has been
originated, underwritten and closed in accordance
with the H4H program guidelines.
Step 4: Fulfilling H4H Mortgage Obligations
Upon sale of the property, the homeowner will use
their sale proceeds to pay off the H4H mortgage as
well as the shared equity and shared appreciation
mortgages.
FHA will provide instructions to the settlement agents
regarding subordinate lien holders who are entitled to
a portion of any appreciation. The lien holder that
previously held the highest priority will receive
payment up to the full dollar amount of its interest,
not to exceed the amount of available appreciation,
and so on, until all prior lien holders are satisfied or
the amount of available appreciation is exhausted. All
remaining appreciation is remitted to FHA.
In instances where the homeowner failed to make the
first payment on their new H4H mortgage, the H4H
statute prevents FHA from paying claim benefits to
anyone holding the mortgage.
new lender to discuss how you may qualify for the
H4H program.
The list of participating lenders is not available yet. We
will publish it in the coming days.
The HOPE for Homeowners (H4H) program was
created by Congress to help those at risk of default
and foreclosure refinance into more affordable,
sustainable loans. H4H is an additional mortgage
option designed to keep borrowers in their homes.
The program is effective from October 1, 2008 to
September 30, 2011.
As many as 400,000 homeowners could avoid
foreclosure through this program over the next three
years. If you are having trouble making your
mortgage payments, HOPE for Homeowners may be
able to help you, by refinancing your loan into a new
30-year fixed rate loan with lower payments.
How the Program Works
There are four ways that a distressed homeowner
could pursue participation in the HOPE for
Homeowners program
Homeowners may contact their existing lender and/or
a new lender to discuss how to qualify and their
eligibility for this program.
Servicers working with troubled homeowners may
determine that the best solution for avoiding
foreclosure is to refinance the homeowner into a
HOPE for Homeowners loan.
Originating lenders who are looking for ways to
refinance potential customers out from under their
high-cost loans and/or who are willing to work with
servicers to assist distressed homeowners.
Counselors who are working with troubled
homeowners and their lenders to reach a mutually
agreeable solution for avoiding foreclosure.
It is envisioned that the primary way homeowners will
initially participate in this program is through the
servicing lender on their existing mortgage. Servicers
that do not have an underwriting component to their
mortgage operations will partner with an FHA-
approved lender that does.
Step 1: Cost-Benefit Analysis
Lender considerations:
Given their fiduciary responsibilities and financial
obligations, lenders will assess their portfolio and
perform a cost-benefit analysis to determine the
feasibility of offering this program to struggling
homeowners.
Affordability versus value: 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. The lender may choose to provide
homeowners with an affordable monthly mortgage
payment through a loan modification rather than
accepting the losses associated with declining
property values.
Borrower eligibility: Lenders that determine the H4H
program is a feasible and effective option for
mitigating losses will assess the homeowner’s
eligibility for the program:
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.
Consumer considerations:
The lender will disclose to the homeowner the benefits
of the program:
Home retention,
New affordable mortgage based on current appraised
value,
10 percent equity
The lender will also disclose to the homeowner the
costs of the program:
3 percent upfront mortgage insurance premium and a
1.5 percent annual premium,
Equity and appreciation sharing with the Federal
government, and
Prohibition against new junior liens against the
property unless they are directly related to property
maintenance.
Step 2: Negotiations Between Borrowers and Lien
Holders
If the lender refinancing the loan does not hold the
senior mortgage lien, it will need to secure an
agreement from the existing lien holder to waive all
prepayment penalties and default fees on the existing
loan and accept the loan proceeds from the H4H loan
as payment in full. The loan amount (including the 3
percent UFMIP) for the new H4H loan cannot exceed
90 percent of the current appraised value of the
property.
The lender will engage existing subordinate mortgage
lien holders to extinguish all subordinate liens on the
subject property. To entice subordinate lien holders
to participate in the negotiation process and release
their liens, FHA has the authority to share its future
appreciation entitlement with them.
Step 3: Originating an H4H Mortgage
The lender will qualify the homeowner for the new
H4H mortgage using the guidelines established under
the terms of the program’s unique statutory
requirements, ensuring the homeowner has the
capacity to make the new payment on the H4H
mortgage in a timely manner.
During underwriting of the loan, the lender will
calculate the future appreciation interest amount for
each subordinate lien holder in accordance with
instructions provided by FHA.
At settlement, subordinate lien holders will receive a
certificate that evidences their interest as an obligation
backed by HUD, with payment conditional on the value
of HUD’s appreciation share.
Following funding of the loan the lender will record –
in addition to the typical security instrument and note
for the first mortgage – a shared equity note and
mortgage (SEM) and a shared appreciation note and
mortgage (SAM). These mortgages will be serviced by
FHA.
The lender will also submit the new mortgage for
insurance to FHA, certifying that it has been
originated, underwritten and closed in accordance
with the H4H program guidelines.
Step 4: Fulfilling H4H Mortgage Obligations
Upon sale of the property, the homeowner will use
their sale proceeds to pay off the H4H mortgage as
well as the shared equity and shared appreciation
mortgages.
FHA will provide instructions to the settlement agents
regarding subordinate lien holders who are entitled to
a portion of any appreciation. The lien holder that
previously held the highest priority will receive
payment up to the full dollar amount of its interest,
not to exceed the amount of available appreciation,
and so on, until all prior lien holders are satisfied or
the amount of available appreciation is exhausted. All
remaining appreciation is remitted to FHA.
In instances where the homeowner failed to make the
first payment on their new H4H mortgage, the H4H
statute prevents FHA from paying claim benefits to
anyone holding the mortgage.
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