| Follow us on Twitter |
Given their fiduciary responsibilities and financial obligations, lenders will assess their portfolio and perform a cost-benefit analysis to determine the feasibility of offering this program to struggling homeowners.
1. Affordability versus value: lenders will take a loss on the difference between the existing obligations and the new loan, which is set at 96.5 percent of current appraised value. The lender may choose to provide homeowners with an affordable monthly mortgage payment through a loan modification rather than accepting the losses associated with declining property values.
2. Borrower eligibility: Lenders that determine the H4H program is a feasible and effective option for mitigating losses will assess the homeowner’s eligibility for the program:
o The existing mortgage was originated on or before January 1, 2008;
o Existing mortgage payment(s) as of March 1, 2008 exceeds 31 percent of the borrowers gross monthly income for fixed-rate mortgages; For ARMs, the existing mortgage payment(s) exceeds 31 percent of the borrowers gross monthly income as of March 1, 2008 OR the date of the new loan application.
o The homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been convicted of fraud in the last 10 years under Federal and state law; and
o The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced into the H4H mortgage.
The Hope for Homeowners consumers may have the following considerations:
The lender will disclose to the homeowner the benefits of the program:
* Home retention,
* New affordable mortgage based on current appraised value,
* 3.5 percent equity
The lender will also disclose to the homeowner the costs of the program:
* 3 percent upfront mortgage insurance premium and a 1.5 percent annual premium,
* Equity and appreciation sharing with the Federal government, and
* Prohibition against new junior liens against the property unless they are directly related to property maintenance.
People also read:
By HUD
Posted April 29th, 2009 by Armen Hareyan
