What is the expected impact of HOPE for Homeowners (H4H)? Per HUD.gov
The Congressional Budget Office estimates that as many as 400,000 homeowners could avoid foreclosure through this program over the next three years.
What is the value of the HOPE for Homeowners program to lenders?
Only FHA approved mortgagees can originate H4H loans. H4H loans may benefit lenders by helping them avoid foreclosure expenses. Although the lender will likely have to write down their existing loan in order to originate an H4H loan, it is still less expensive than foreclosure and disposition of property.
Why should existing lien holders accept the short payoff that is required under the terms of the law?
HUD understands that it will be a challenge to encourage lien holders to accept short payoffs in order to participate in this program, especially when there are other loss mitigation tools available that may provide a more suitable solution. However, in instances where those tools are ineffective, we believe that the holders of these mortgages should accept the short payoffs in lieu of the tremendous losses associated with foreclosure. Similar challenges exist with subordinate lien holders but by offering them the opportunity to have an interest in FHA’s share of future appreciation in the property, we hope to entice these lien holders to participate as well.
What advice should loan servicers/lenders give borrowers who are facing difficulties fulfilling their obligations on their existing mortgage(s)?
The H4H program is another loss mitigation option to keep borrowers in their homes on sustainable and affordable terms. Lenders should provide information to borrowers on possible options include contacting a HUD approved counseling agency. Borrowers may call 1-800-569-4287 or visit http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
When can I start originating H4H loans?
The program is effective from October 1, 2008 to September 30, 2011.
Eligibility and Underwriting issues
How does the H4H program differ from FHA Secure?
• Any type of first mortgage as long as it was originated on or before January 1, 2008.
• All existing lien holders must waive prepayment penalties and late charges, as well as extinguish all liens against the property.
• Existing first lien holders are required to accept the proceeds of the H4H mortgage as payment in full.
• Borrowers will be required to share both the initial equity created with the H4H loan, and future appreciation.
• The maximum loan amount is $550,440, nationwide.
How does the appreciation sharing piece work?
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. 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.
Are there special underwriting requirements for the H4H program?
Yes, in addition to standard underwriting procedures, the underwriter must:
• Determine that the borrowers existing total monthly mortgage payment is in excess of 31% of their gross monthly income in March of 2008.
• Determine the borrower’s total monthly mortgage payment on the new H4H loan is less than the borrower’s total monthly mortgage payment on existing loans.
• Determine that the DTI’s are at or below 31/43. However, if the borrower has successfully completed a 3 month trial modification, ratios can be expanded not to exceed 38/50.
• Review income as reported on the transcript or copy of the borrower’s income tax returns for the previous two years.
How is the total monthly mortgage payment on the existing loan(s) calculated for the purpose of qualifying the borrower for the H4H program?
The total monthly mortgage payment is defined as the fully indexed, fully-amortizing Principal, Interest, Taxes and Insurance (PITI) payment. This includes homeowner’s association dues, grounds rents, special assessments, and all subordinate liens as of March 1, 2008.
Can I add a non-occupying co-borrower to help qualify?
No, however you may add a non-occupying ,co-signer who does not have any ownership interest in the property.
What if there is currently a non-occupying co-borrower on the loan?
The non-occupying co-borrower will need to quit claim their interest in the property prior to the occupying co-borrowers applying for the H4H program.
What loans are eligible for refinance under the H4H program?
Any type of mortgage is eligible for refinancing under the H4H program, including conventional (prime, Alt-A, subprime), or government backed (FHA, VA, or Rural Development), fixed or adjustable rate mortgage.
The loan must have originated on or before January 1, 2008, the borrower must have made at least six (6) payments on the existing mortgage, and the total monthly mortgage payment exceeds 31% or the borrower’s March 2008 gross monthly income. The borrower may be current or delinquent at the time the new H4H mortgage is originated.
What properties are eligible?
The property to be refinanced must be the borrower’s primary and only residence in which the borrower has an ownership interest.
Only 1-unit properties are eligible, including condominiums, cooperative units and manufactured housing permanently affixed to realty.
Does the borrower have to be delinquent on their existing loans to be eligible for the H4H program?
No, the borrower may be current or delinquent at the time of application for the H4h mortgage.
What must the existing lienholders do?
Existing first mortgage lien holders must waive any and all prepayment penalties and late payment fees, agree to accept the proceeds from the H4H mortgage as payment in full, and release their outstanding mortgage liens.
Existing subordinate lien holders must waive all prepayment penalties and late payment fees as well as release their outstanding mortgage liens.
Will I have to get a new appraisal or can I use an AVM?
In all cases a new FHA appraisal must be ordered specifically for the H4H transaction and the appraisal should be no more than 3 months old at the time of closing.
What are the rates for the Upfront Mortgage and Annual Insurance Premiums (UFMIP)?
The Upfront Mortgage Insurance Premium (UFMIP) is 3% and the Annual is 1.5%
Can the UFMIP be financed?
Yes, however the maximum LTV under the H4H program is 90% regardless of whether or not the UFMIP is financed.
Will there be additional disclosure requirements?
Yes, the originating lender must provide the HOPE for Homeowners Consumer Disclosure and Certification form at the time of initial application for the Program.
Are there additional lender certifications?
Due to the statutory requirements and the unique nature of the program, lenders and underwriters will execute a certification assuring HUD that they have underwritten and closed the loan in accordance with the H4H program guidelines.
What is the maximum LTV for the H4H program?
The maximum LTV for the Program is 90%, including any financed UFMIP.
Who can pay closing costs?
Standard FHA policy regarding closing costs is applicable, including the 1% cap on origination fees.
• Borrowers may pay closing costs from their own assets,
• They may be financed into the mortgage provided the 90% LTV limit is not exceeded,
• The servicing lender, originating lender and/or a third party (e.g. a Federal, state or local Program) and/or
• The originating lender my pay the borrower’s closing costs and prepaid items through premium pricing.
Is subordinate financing allowed to pay closing costs, like under FHASecure?
No. Subordinate financing is not allowed in the first 5 years of the mortgage except in when necessary to ensure maintenance of property standards.
Will Wall Street be receptive to purchasing these new loans?
These loans can be securitized in Ginnie Mae FS Pools, making them attractive to Wall Street and other investors.