Last week I attended FHA's Hope for Homeowners training in Atlanta. I will reserve comment (if I can) for now and give you the cliff notes version that you may find useful. First off, do you remember FHA Secure? Well, it had a fixed beginning and end. H4H simply picks up where FHA Secure trails away. FHA's desire to continue to help struggling homeowners is admirable but I believe they need to return to the drawing board on this one, call in a committee of salt-of-the-earth loan officers who talk to borrowers everyday and get the real deal on what's needed to slow down this foreclosure boom.
Here's how the program was laid out: "Under the program, borrowers having difficulties paying their mortgages will be eligible to refinance into FHA-insured mortgages they can afford. (JG-Gotta love it so far).
...cont'd: For borrowers who refinance under HOPE for Homeowners, lenders will be required to "write down" the size of the mortgage to a maximum of 90 percent of the home's new appraised value. (JG - Well, you're probably asking --which lender is going to agree to do this? Also, what about the numerous borrowers who have 1st and 2nd liens--both lien holders would have to agree to this). Here's their response: In many instances, lenders will determine that such a reduction in principal will allow them to avoid a costly foreclosure, while helping borrowers stay in their home.
I admit I like this as an option to lenders. Certainly, with the high cost of foreclosing on a property, lenders need more options. OK, so what criteria must borrowers meet in order to be eligible for this program?
- Their mortgage must have originated on or before January 1, 2008
- They cannot afford their current loan;
- They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments*;
- They do not own a second home;
- Their mortgage debt-to-income must be at least 31 percent;
- They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years;
- They must follow FHA's long-standing and strict policy of fully documented income and employment.
OK class, I have a problem with * for obvious reasons. Most lenders today do not want to help a homeowner unless they show evidence they are behind on their mortgage, thus confirming there is a hardship situation in play. This is reality. Also, the last bullet--if you go deeper--it was explained during the training that the borrower could not have come from a "Stated" loan program in which they falsified income. They are going back to the old loan application and comparing this to the 1040s that were submitted to the IRS. Well, let's keep it real. Stated programs did not represent the exact income of an IRS tax returns. At the time, lenders created this program so that self-employed borrowers could still buy homes. The income used on the application had to be deemed reasonable for the profession. There was a "reasonable test" administered and a salary.com system used for this. So, with this criteria, automatically you will eliminate quite a few folks.
In the next post we will discuss 2 additional criteria which are huge in my mind and thus the reason that I think FHA needs to revisit this program. We will also discuss the program timeline and the steps that a homeowner should take to participate in H4H.
Until then....
