A Closer Look at the Housing Bill's "HOPE"
President Bush quietly signed the new Housing Bill this week, as expected. One of the new law's most significant changes is the "HOPE for Homeowners" program, adding new Section 257 to Title II of the National Housing Act (12 U.S.C. §1707 et seq.), among other sections. The HOPE program ("Home Ownership Preservation Entity" fund), which is voluntary for lenders, allows certain mortgage borrowers to refinance current mortgages of owner-occupied homes into FHA-insured 30-year fixed mortgages.
The new insured mortgages cannot exceed 90% of the home's value (determined by a new independent appraisal), which means participating lenders must absorb any deficiency for mortgage borrowers who are underwater on current loans. Lenders also must waive all "penalties for prepayment or refinancing of the eligible mortgage, and all fees and penalties related to default or delinquency on the eligible mortgage." The new loan would extinguish any subordinate liens.
To qualify for the program, a borrower must have a debt-to-income ration of greater than 31%, must provide a certification that the borrower "has not intentionally defaulted on the mortgage or any other debt, and has not...furnished material information known to be false for the purpose of obtaining any eligible mortgage." Borrowers under the program also must document income and share any subsequent equity gains with FHA.
The new insured mortgages cannot exceed 90% of the home's value (determined by a new independent appraisal), which means participating lenders must absorb any deficiency for mortgage borrowers who are underwater on current loans. Lenders also must waive all "penalties for prepayment or refinancing of the eligible mortgage, and all fees and penalties related to default or delinquency on the eligible mortgage." The new loan would extinguish any subordinate liens.
To qualify for the program, a borrower must have a debt-to-income ration of greater than 31%, must provide a certification that the borrower "has not intentionally defaulted on the mortgage or any other debt, and has not...furnished material information known to be false for the purpose of obtaining any eligible mortgage." Borrowers under the program also must document income and share any subsequent equity gains with FHA.
