Foreclosure and Hope for Homeowners
October 21, 2008
The recent government bailout has spawned a new program called Hope For Homeowners. This program is designed to help as many as 400,000 struggling home owners who are facing foreclosure. While this is good news for some home owners, there are certain conditions that must be met to qualify.
The home you wish to refinance must be your primary residence - rental properties and second homes don’t qualify. You can’t own another home either. The monthly mortgage payment must be at least 31% of your monthly income and you had to have obtained the mortgage on or before January 1, 2008.
The program is entirely voluntary for both the lenders and borrowers.
In order for the program to work, the lender must agree to refinance the delinquent mortgages into a 30 year fixed loan at 90% value of the current market price. The current market price will be determined by an FHA approved appraiser. It’s possible that the interest rate may not change, but monthly payments will be lower due to the lesser current market values. Homeowners that currently have adjustable rate mortgages (ARMS) will now have a fixed monthly payment for the life of the loan.
The homeowner would be responsible for any closing costs as well as an up-front payment of mortgage insurance. The FHA will insure the new mortgages.
The Hope for Homeowners program went into effect on October 1, 2008 and will remain available until September 11, 2011.
Since this is a voluntary program, it will take time to see if the mortgage lenders are willing to participate. They would receive an FHA insured mortgage in exchange for accepting the reduced 90% mortgage refinancing. The lenders may wish to explore other measures, such as loan extensions and reduced interest rates, before they agree to absorb the costs of the reduced mortgages.
If you enjoyed this post, make sure you subscribe to my RSS feed!