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         FHA HOPE for Homeowners H4H           

Effective October 1, 2008

FHA has introduced a new mortgage insurance program called the HOPE for Homeowners (H4H) Program. Under this Program, certain borrowers facing difficulty in paying their mortgages will be eligible to refinance into affordable FHA-insured mortgages.  The H4H Program is effective for loans or after October 1, 2008 through September 30, 2011. 

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

Borrower Eligibility

        Borrowers who are current or delinquent (or in bankruptcy) on their mortgage at the time of the refinance are eligible for this Program, if they:     

o       Have not intentionally defaulted on their mortgage or any other debt (Intentionally defaulted means the borrower had available funds that could pay the mortgage and other debts without hardship.  Debts subject to a documented bona fide dispute may be excluded.) AND  

o       Have made a minimum of six (6) full payments during the life of the existing senior mortgage (full payment is defined as what was acceptable to the lender for meeting the monthly payment obligation under the terms and conditions of the mortgage). 

        Borrowers must reside in the property securing the loan being refinanced, and may not have an ownership interest in other residential real estate, including second homes and/or rental properties.

        Borrowers cannot have been convicted of fraud under state and Federal laws in the last 10 years. 

        Borrowers must certify that they did not knowingly or willfully provide material false information to obtain the existing mortgages being refinanced under the H4H Program.

        As of March 1, 2008, the borrower’s aggregate total monthly mortgage payment debt-to-income ratio (DTI) on all existing mortgages must be greater than 31 percent of the borrower’s gross monthly income. The total monthly mortgage payment is defined as the fully-indexed and fully-amortized Principal, Interest, Taxes and Insurance (PITI) payment (this includes principal and interest, taxes and insurances, homeowners’ association fees, ground rents, special assessments and all subordinate liens).

 FHA recognizes that reconstructing the borrower’s prior total monthly mortgage payment DTI as of March 1, 2008 may be difficult, especially as the H4H Program nears its sunset date.  To comply with this eligibility requirement, lenders must obtain: 

1.      From the borrower, evidence that the prior mortgage DTI was more than 31 percent on March 1, 2008, such as pay stubs for March 2008, or a signed and dated copy of the individual 2008 Federal tax return, when available, to determine gross monthly income for that month (earnings divided by 12), or W-2s, financial records, or verification of employment from the borrower’s employer.   

Lenders may also rely on the borrower’s signed and dated 2007 Federal tax return if the lender has no reason to believe that the borrower’s income in March 2008 was materially different than the income reported on the 2007 Federal tax return. 

       To determine March 2008 income for self-employed borrowers, obtain a copy of the quarterly tax return that contains income stream information for March 2008 or a signed and dated Profit and Loss Statement and balance sheet that contains income stream information for March 2008 or a signed and dated copy of the individual 2008 Federal tax return, when available, (earnings divided by 12). 

2.      From the servicer of the mortgage, the borrower’s total monthly mortgage payment due for March 2008, including any amounts due on subordinate liens.

        For mortgages without escrow accounts, the lender should obtain tax and insurance information from the borrower.  If the borrower does not provide insurance information, then the servicer of the mortgage should estimate the monthly cost of hazard insurance (and flood insurance, if applicable) based on the property’s location and the rates in effect for 2008.  If the borrower does not provide real estate tax information, the lender should obtain it from public records.



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