The FHA Hope for Homeowners loan program was released this month. The stated goal of the plan is to help homeowners, who are paying mortgages that are significantly more expensive than when they bought the home (due to rate adjustments), get a home loan they can afford.
Key components of the FHA Hope For Homeowners loan program are not limited to but include:
- An appraisal will be performed and the maximum loan amount will be 90% of that appraised value. All subordinate liens will be extinguished and the exiting lienholder will have to agree to a loss of principal.
- The current housing payment must be more than 31% of the homeowner’s gross monthly income.
- The homeowner must not have misrepresented his/her income on the original loan application.
- The homeowner must get a new 30-year fixed rate loan and qualify based upon documented income.
- The homeowner must agree to an declining equity sharing agreement (for the existing equity), with the FHA, for a specified period of time.
- The homeowner will share in future appreciation with the FHA.
- The program is completely voluntary; existing lienholders don’t have to participate.
Mary Miller compiled some comments from Mortgages Unzipped authors which demonstrates the difficulty of the program. Loan originators may be hesitant to work with you because of the low probability of a successful funding. That low probability is due to the fact that existing lienholders may have to take significant writedowns. I wouldn’t blame an originator who refuses to participate in the FHA Hope For Homeowners Program; loan originators aren’t paid on unsuccessful fundings.
Nonetheless, we welcome loan applications, under the FHA Hope for Homeowners, for Californians in “upside-down mortgages”. We recently hired a team member with the skill set to work with lenders’ loss mitigation departments. That specific expertise, combined with our long history as a HUD lender, leads us to believe that we can assist folks who desperately want to retain their California home. We offer this program with a few conditions:
- We must determine your maximum qualified loan through full income documentation at application. If you can qualify for a loan amount that might be a reasonable offer to the existing lienholder, we’ll proceed to an appraisal.
- You must pay for the appraisal and credit report upfront; that should be about $500. The appraised valuation is a key component of the program so that valuation must be established prior to the offer to the existing lienholder.
- We expect to earn a 2% fee, whether paid by you or the new lender ( through yield spread premium). That’s twice the amount we earn for new loan originations. We think this higher fee is reasonable considering the amount of work required and the low probability of loan funding. We only receive this fee if we are successful in funding your new loan.
The FHA Hope for Homeowners Loan program offers Californians a chance to stay in their homes at a reasonable price. If your intention is to live in your home for 5-10 years, this may be a workable solution for you.
While the plan isn’t perfect we know that certain sub-prime lenders have sold their loans at a significant discount and will welcome any and all offers that allow them to make a profit. For example, if you have a loan with First Franklin, this program might make sense for you. First Franklin was purchased by Merrill Lynch, in early 2007. Merrill Lynch sold these loans, for 33 cents on the dollar, this past summer. What that means is that they sold your $500,000 loan to an investor for $165,000. If we have to approach First Franklin’s loss mitigation department with a $350,000 payoff for that $500,000 loan, the new investor stands to more than double his money in a few months. That’s a reasonable proposition to entertain.
Not all loan servicers will be that cooperative, though. We believe that our connections with Wall Street and secondary mortgage market investors will be a distinct advantage to you, the beleaguered California homeowner. The FHA Hope for Homeowners Loan program isn’t perfect but it may offer you significant relief. Please contact me if you have questions about it.
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Comments
17 Comments so far
gabriel gonzalez
I need information about,how can I refinance my home with fHA
Brian Brady
Gabriel:
Please contact me at 858-777-9751
Andrew Adams
Brian,
I find your post offensive.
“Loan originators may be hesitant to work with you because of the low probability of a successful funding. That low probability is due to the fact that existing lien holders may have to take significant write downs. I wouldn’t blame an originator who refuses to participate in the FHA Hope For Homeowners Program; loan originators aren’t paid on unsuccessful fundings.”
The truth is if the investors were willing to purchase the H4H loans I am sure the majority of Loan Originators would do everything they can to assist consumers in obtaining this financing. The truth is that to date I am unaware of an investor agreeing to purchase these loans through 3rd party originations.
What you seem to be describing is assisting clients in negotiating short refinances using the Hope for Homeowners to open the door. Don’t really have an issue with trying to help these folks out but do take offense to you using the Hope for Homeowners program to open the door.
1 questions for you.
1. What investor do you have that will purchase these loans?
Jack Burns
Brian Brady:
I can’t believe how the government is getting involved in the lives of private citizens. Now we are looking at shared equity! The nationalization of the credit industry is just about complete! First our government screws around with the rules until the system falls apart, then they come up with a solution which most experts agree will never work, taking taxpayer money to federalize the investment business! I remember how our government handled the savings and loan mess which they created in the 1980’s. Filled with fraud, mismanagement, lack of oversight and “cronie favors”. All at the public expense! When will be ever learn?
Brian Brady
Andrew, you said:
“This is all about grabbing headlines and not solving problems. It sounds great at first, but when push comes to shove, the number of folks that will benefit from it is minimal. For any game plan to work, you need the entire team to buy into it. I do not believe that the lenders are buying into this plan. Lenders are in rough shape, and agreeing to write down losses is not what they want to do; it’s what they are trying to avoid.”
Explain this:
http://online.wsj.com/article/SB122325440046106461.html?mod=googlenews_wsj
I can’t help you with an answer to that “one question”, Andrew because of a confidentiality clause in my employment agreement; I’m forbidden from disclosing material information about our business to a competitor.
READERS:
Andrew will most likely accuse me of dodging the question and say something like “we all go to the same place for money”. Three years ago, in the height of the “easy money times” his accusation might be correct. Today, all mortgage brokers are NOT treated equally.
Lenders and banks seek out mortgage brokerages with specific skill sets for pilot programs. We’ve worked hard to earn our reputation with our investor/lender partners. Our success comes from that reputation.
I want to reiterate the fact that this program will initially have a low percentage if success; that’s why I hired a dedicated team member to handle these loans.
The truth is that lenders are starting to face the fact that you, the strapped homeowner, simply won’t “hang in there” with a loan balance that is 30% higher than the value of the home. They know that you’ll “walk away”. In order for them to “keep you on the hook”, they have to make concessions. If you click the link I cited above, you’ll see that Bank Of America is proactively addressing this, by “writing down principal” in a massive loan remodification program.
If you’re a California homeowner, please contact me about this program.
Brian Brady
Mr Burns,
Love your comments, Sir. I don’t make the rules I just play by them.
Jennifer Monastero
Brian, I am fairly certain that MANY lenders and brokers in CA and other states will be able to handle these loans. Scaring people into thinking it’s something they can only get through you is creepy. Give good information, and if they call, wonderful. Not sure why you have to do this, but it does seem to stink of self-promotion. If I remember correctly, we aren’t supposed to do that. You are the only writer who does this. Does it bring you business?
Andrew Adams
Brian,
Anyone that is buying the confidentiality clause…..I have some swamp land in Florida you may be interested in….
This link brings you to the HUD website with all the information about the H4H program. Including a yet to exist list of all lenders offering the program. Currently th elist consists of no one!
http://portal.hud.gov/portal/page_pageid=73,7601299&_dad=portal&_schema=PORTAL
Andrew Adams
The link doesn’t work….Figures
Brian,
I have no doubt that Loan Modifications will become a large part of the industry as lenders try and protect them selves. I had lunch today with a forclosure attorney that is working on 180 loan modifications for a very large lender. It’s the reality of the current market.
I take offense to you marketing your company under the guise of the H4H program.
Brian Brady
Jennifer, Back to being the Zillow Mortgage cop again? How about we let the editor handle our content?
Andrew, I’m not going to do your homework for you.
READERS: I want to remind you that I can only offer this loan in California.
Andrew Adams
I’ve done my homework….I believe in giving consumers accurate information, without the spin.
Arizona Mortgage Updates and Reports | Phoenix Arizona Real Estate Blog
[...] each lender seems to be handling it differently if they are participating at all) our friend Brian Brady does an excellent job of explaining some of the basics. Because Brian doesn’t do FHA loans in Arizona, we have again covered some of the same [...]
Angel Little
As a home owner and Realtor in Georgia, I am very hesitant about the Hope program. I did not see a mention of the following, taken from
http://www.hud.gov/fha/home080730.cfm which says:
Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac.
If someone has already hit a financial burden, how will they have 3% of the ORIGINAL loan amount AND pay an additional 1.5% yearly on the new mortgage, which, if escrowed in, will not lower their payment, or, cause them to have to come up with an additional lump sum yearly.
The Only thing I see this program doing is lowering everyone’s home values and making anyone who needs to sell there home upside down. Most of the home owners I deal with are Military alot of them bought at the height of this mess and now can’t sell them to move to their relocated area because their home is worth less now than they paid for it. They cannot afford to bring $20,000 or so to the closing table. Unfortunatly, that is why people are walking away from their homes. They simply cannot sell the home for pay off amount. This is the real “trickle down” affect.
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[...] I don’t have steak to serve them, a few might get by on the rice I do have to offer them. Commenters on Zillow’s Mortgages Undressed criticized me for outhustling them but I decided that serving needy homeowners was more important than being popular with a bunch of [...]
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Arthur Groutage
I have a Chase first and second with GMAC. Can you possibly help me with a HOPE Loan. Please let me know. I bring home $2500 every two weeks and my first is 2250.00 and second is about 250.00. I don’t have impounds on the account because I had them cancelled. They are about $300. Please email me or leave me a message. (661) 435-1444