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         FHA HOPE for Homeowners H4H           

Determining Eligibility Calculating the Maximum Mortgage
Consumer Protection & Disclosures Underwriting and Qualifying
Appraisals Documentation Requirements
Term & Rates of H4H Mortgages Prohibition Against Subordinate Financing
Mortgage Insurance Premiums Equity & Appreciation Sharing
  Extinguishment of Subordinate Liens

Equity and Appreciation Sharing

 

Shared Equity Mortgage

     As a condition of the H4H mortgage, the borrower must share with HUD a portion of the initial equity, which is defined as the difference between the appraised value at the time of H4H loan origination[1] and the original principal balance on the H4H mortgage.  The originating lender will prepare a Shared Equity note and mortgage (SEM). A dollar amount equaling the initial equity will be inserted in the SEM.  The SEM will be executed by the borrower and recorded with all other loan documents in second lien position

Example:  Appraised value is $200,000.  Maximum loan to value on a H4H mortgage is 90%, or $180,000.  The equity amount that would be stated in the SEM is $20,000.

Shared Appreciation  

As a condition of the H4H mortgage, the borrower must share with HUD 50 percent of any future property appreciation upon sale or disposition of the property.  Future appreciation is the difference between the gross proceeds from the sale or disposition of the property and the appraised value of the property at origination of the H4H mortgage, less allowable closing costs incurred in connection with the sale or disposition and a percentage of the value of any capital improvements to the home that increases the value of the property. 

The originating lender will prepare a Shared Appreciation note and mortgage (SAM) using the format attached as Exhibit E.  The SAM will be executed by the borrower and recorded in third lien position. The originating lender is responsible for ensuring that a SAM (and a SEM) complies with state law.


 

[1] The Act provides that, in the event of refinance, sale or other disposition, HUD receive the following percentage of initial equity:

   During Year 1            100% of equity is paid to FHA

During Year 2            90% of equity is paid to FHA

During Year 3            80% of equity is paid to FHA

During Year 4            70% of equity is paid to FHA

During Year 5            60% of equity is paid to FHA

After Year 5              50% of equity is paid to FHA

 

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