Hope for home owners is part of thew new law past by President Bush on July 30th, 2008 this year. The new law is the Housing and Economic Act of 2008. The new law is made up of 789 pages of things to help fix the housing industry.
One of the provisions in the law is a plan to help distressed home owners called "hope for home owners". Please keep in mind that the information I am about to provide was collected from a well respected company called Mortgage Market Guide. It is a multi million dollar company that offers breaking news on the mortgage industry and how it relates to the economy.
Hope For Home Owners is a program to help home owners stay in their homes rather than go into foreclosure and have to leave the home. Below is the most recent information I have received regarding the program.
- The housing and economic Act of 2008 made this program possible past on July 30th, 2008. There are several provisions in the law. Attorney's and others that are apart of Wells Fargo have to break down all the specifics of the new provision and then teams have to implement the new program so that we can offer it to consumers. Because of that we have not received all the information yet as to when it will become available and exactly the parameters of the program.
- The provision does not require lenders to participate although Wells Fargo Home Mortgage has stated that they will participate in the program.
- My understanding is that it will be available to customers who are in a distressed home that is worth less than they currently owe on their mortgage. I have heard that there will be several different ways a consumer can qualify for the hope for home owners program but as of know I have received information that it will be offered to people who are having a hard time making their payments and can not refinance into a standard loan because the home is worth less than owed.
- If the lender agrees to participate the lender will have to take a loss on the loan and the customer will be able to refinance into an FHA loan at 90% of the CURRENT value of the home. For Example: Customer owes $220,000 on a home and is having a hard time making the payments. The home is worth $200,000 currently. 90% of $200,000 is $180,000. So....The lender will have to take a $40,000 loss and the home owner will be able to refinance into a 30 year fixed FHA loan with a new loan balance of $180,000. A perfect example in this situation might be someone who had a 5/1 ARM and the rate just went to a high variable rate and they can no longer afford their payments nor refinance because the home is worth less than owed. This way they get a new lower mortgage amount on a 30 year fixed loan. Overall a great program.
- There are advantages for the lender as well. The first 5 years from the time the lender agrees to do this the lender will receive most of the upside equity if the customer sales the home. I have not been given exact percentages or numbers yet. After 5 years it is my understanding that the home owner will split 50/50 with the lender any upside equity based on the value used at the time of the sale. I think it is still a good deal for the consumer because they were forgiven of $40,000 in mortgage debt anyways.
- The home owner will still have to provide full proof of income documentation to show that they can afford the new 30 year fixed FHA mortgage payment. So although the lender may be willing to participate the home owner will have to qualify for the loan as well.
- Again the loan program will be a 30 year fixed FHA loan.
Overall I think this is a great way for lenders to keep a home owner in their home and get a bad loan off of their books and for the home owner to get out of a bad loan as well and into a safe 30 year fixed loan. Both the lender and the home owner are in a win win situation that avoids the possibility of foreclosure.
if you have any questions or comments please fire away!
Phil White 480-430-3080
