The FHA has come up with a new loan referred to as the hope for homeowners loan program. Included in the Housing and Economic Recovery Act of 2008, the concept is somewhat simple and provides relief for strapped homeowners who have come in to trouble paying their mortgage. While there are many details that are actually difficult to understand, the basics of the hope for homeowners program are somewhat easy to understand and are aimed at helping homeowners who are in desperate straits and wish to keep their home.

Determining eligibility for the hope for homeowners program from FHA is somewhat straightforward. The borrower can be current or delinquent in order to be financed with the FHA hope for homeowners program if they have made a minimum of six full mortgage payments on the mortgage that they currently possess that is in first lien position and that they have not intentionally defaulted on any type of mortgage or other debt. By referring to the phrase intentionally defaulted, this means that the borrower was currently capable of paying their mortgage without financial hardship, but simply did not do so. The borrower must actually live in the property and can’t have any type of other ownership in other properties, such as investment properties or a second home or even a non-occupant co-borrower on some other type of property. Some of these details are difficult to understand, but they basically boil down to the fact that the borrower must be a regular, run-of-the-mill homeowner, and not any type of investor.

The total monthly payment for the debt to income ratio for the borrower must be significantly higher than 31% as of March 1, 2008. This total payment includes subordinate leans, special assessments, ground rent, association fees, insurance, taxes, interest and of course the principal. While this seems like the standard amount of boilerplate, it is somewhat simple to understand if you add up all of your fees and insurance payments into one lump sum, as most mortgage payments are already arranged. The mortgage being financed for must have been in place or originated on or before January 1, 2008 in order for the borrower to be eligible.

In addition to all of these requirements, the holder of the mortgage must release all outstanding mortgage liens, agree to accept the proceeds of the new mortgage as full payment and waive all prepayment penalties and late fees. Considering the chances of saving the mortgage, it is clear that many note holders would be happy to agree to these requirements. There are several somewhat arcane requirements that provide for HUD to share in the profits if you sell the property in the future or to share the equity that is accumulated over time. Some of this is simply boilerplate that is very difficult to understand, but basically boils down to the fact that the housing and urban development department wants to share in the wealth.

The help for homeowners program can only be used on FHA 30 year fixed loans and the upfront mortgage insurance premium is 3% regardless of the loan-to-value ratio on the home. In addition the mortgage insurance is 1.5%, somewhat higher than the normal rate of .5%.