On July 30, 2008, President Bush signed the
Housing and Economic Recovery Act of 2008 (the "Act") into law. The Act amends the National Housing Act to create a new temporary FHA mortgage insurance program called HOPE for Homeowners (H4H). This new Program, as described in
Mortgagee Letter 2008-29, is designed to assist borrowers at risk of default or foreclosure with refinancing into an affordable 30-year, fixed rate mortgage that is insured by FHA. The Program is effective for endorsements on or after October 1, 2008 and ends September 30, 2011. Below is a description of the new Program along with a description of DocMagic, Inc.'s plans for implementing the requisite documents under the H4H Program.
Eligibility Requirements
To be eligible to participate in this Program, the following requirements must be met:
- Borrower(s) must be unable to pay their existing mortgage loan without help;
- Borrower(s) must be owner-occupants in the property and not have an ownership interest in any other property (such as second homes and/or investment properties);
- Borrower(s) must have had their existing mortgage on or before January 1, 2008, and made at least six (6) full payments;
- Borrower(s) must have their mortgage debt to income ratio greater than thirty-one (31) percent of their gross monthly income, as of March 1, 2008; and
- Borrower(s) must certify that they have not been convicted of fraud under any Federal or State law in the past ten (10) years, intentionally defaulted on their existing mortgage(s), and did not knowingly or willingly provided false material information to obtain their existing mortgage(s).
How the H4H Program Works
The H4H Program helps homeowners stay in their current homes by refinancing their existing loan into a more affordable FHA fixed rate loan. Some of the provisions in this H4H Program include:
- The maximum mortgage loan limit may not exceed $550,440.00;
- The loan-to-value (LTV) threshold may not exceed ninety (90) percent of the new appraised value of the property, including any Upfront Mortgage Insurance Premiums (UFMIP);
- The UFMIP is three (3) percent of the base loan amount, and the monthly Mortgage Insurance Premium is one and one half (1.5) percent of the base loan amount;
- Borrower(s) must agree to share with HUD a portion of the initial equity created with the new refinance mortgage and fifty (50) percent of any future property appreciation;
- The note holders of the mortgage being refinanced must waive all prepayment penalties and late fees, and must release their outstanding mortgage liens. The note holders for a first mortgage must also agree to accept the proceeds of the new H4H mortgage as full payment; and
- Borrower(s) are prohibited from taking out a second mortgage lien for the first five (5) years of the mortgage, except when emergency property repairs are needed.
DocMagic to Provide H4H Program Documents
DocMagic, Inc.'s Compliance Department is in the process of laying out and programming the various exhibits to ML 2008-29, except for Exhibit "C" thereto. With respect to the Shared Equity mortgage and Shared Appreciation mortgage, the Compliance Department is creating state-specific mortgages to adapt them to state law. A target date for completion of these forms and creation of an H4H Program is scheduled for mid-November, 2008.
If you have any questions regarding the contents of this article, please contact the Compliance Department.
1 According to ML 2008-29, "full payment" means the payment that was acceptable by lender for meeting the monthly payment obligation under the terms and conditions of the mortgage.
2 "Intentionally defaulted" means the borrower had available funds that could pay the mortgage and other debts without hardship.
3 "Initially equity" means the difference between the appraised value and the original principal balance on the H4H mortgage. The equity amount that HUD will receive is based on a tiered structure percentage - 100% during year one, 90% during year two, 80% during year three, 70% during year four, 60% during year five, and 50% after year five.
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