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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

 Prohibition Against Subordinate Financing

     Under the H4H Program, borrowers are prohibited from taking out new subordinate liens for the first 5 years of the mortgage except when necessary to ensure maintenance of property standards.  Therefore, during the first 5 years of the mortgage, FHA will permit a subordinate mortgage lien only if the proceeds are essential to preserve and protect the property, and: 

·        The condition to be repaired represents a health and safety hazard and/or the failure to make the repair will cause the property condition to deteriorate; 

·        The cost of the proposed repair is reasonable for the geographic market area as determined by HUD’s residential property management contractor; 

·        The repairs are not primarily cosmetic and do not represent routine maintenance; 

·        The financing is a closed-end loan under Federal Reserve Board’s Regulation Z; 

·        The financing does not reduce the amount of the government’s equity share in the property; and 

·        The new total debt does not exceed 95 percent of the property’s new appraised value. 

HUD will not subordinate equity or appreciation sharing notes to any subordinate financing – either within the first 5 years or thereafter – except liens as described above or for FHA loss mitigation actions (mortgage modifications and partial claims).

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