Hope for Homeowners Act

The Hope for Homeowners Act goes into effect today. This Act, passed by Congress and signed by the President in July, provides an opportunity for distressed homeowners to refinance their existing loan into an FHA-backed fixed rate loan.

The Act will help homeowners, who are eligible for the program, to cancel their current loan and take out a new fixed rate FHA-backed loan for 90% of the home’s current value. The catch? The lender has to be willing to re-write the loan and take the loss between the current value and what is owed on the existing loan. The program is voluntary but offers lenders an alternative to an expensive foreclosure.

Also, borrowers must meet eligibility requirements:

• the current loan must have originated prior to January 1, 2008,
• the home must be owner-occupied,
• homeowners must certify, under penalty of law, that they have not intentionally defaulted on their loan so that they can qualify for the program,
• the homeowner doesn’t own a second home, and
• homeowners must have a mortgage to income ratio of 31% or more - their current mortgage payment is, at least, 31% of their income.

I’m currently working with a homeowner who will probably qualify for this program. I spoke to the Loss Mitigation Department of my homeowner’s lender and, as of today, they are waiting for FHA to provide information on how to proceed with this program. Let’s hope this information is made available soon.

More information on the Hope for Homeowners Act