HOPE for Homeowners Program - What You Need to Know
In 2006 and ‘07, foreclosures went from being a problem to becoming a full-blown crisis. Mortgage companies collapsed in bad debt (with some of them under investigation for mortgage fraud), banks went dry and more and more homeowners faced with balloon payments defaulted on their loans. The ripple effect went through the whole economy, and the foreclosure tidal wave spread past the “subprime” sector. As more Americans lost their jobs and couldn’t afford their mortgage payments anymore, ordinary middle-class people (some of whom had been in their homes for years) went into default and foreclosure.
The HOPE for Homeowners program was devised in late 2008 by the Bush administration to help distressed buyers faced with foreclosure. It’s a program designed to get people into HUD-backed loans with affordable payments, while also keeping properties off the lenders’ foreclosure inventories. Lenders participating in HOPE For Homeowners will be required to write-down loan principals to 96.5 % of current appraisal values in the home’s area, meaning that borrowers who were “upside-down” on their loans would now have a slice of equity instead. The HOPE for Homeowners program also encourages lenders to come up with their own workout agreements before foreclosure documents are mailed out.
- Certain conditions must be met for the homeowner to participate:
- The mortgage must have been obtained before January 1, 2008
- The homeowner must be having a hard time making payments
- The home must be a primary residence and not a second home or rental property
- The borrower’s debt/income ratio must be greater than 31%
- All information on the current mortgage must be true, and the borrower not convicted of fraud in the last ten years
- Lenders must agree to release current mortgage lien.
- Borrower must meet all FHA requirements for employment and income.
The HOPE program also sets a limit at $550,000 for refinances. If the home is sold, the homeowner will be expected to split the proceeds from equity with HUD. It’s not a perfect plan, but it’s an interim solution to try to stop the bleeding in the current foreclosure crisis.