Is Hope for Homeowners a Plan for You?

The Hope for Homeowners (H4H) plan went into affect on October 1^st. While, I do believe it is a benefit for some, I don’t think it will help or benefit as many as it should. Many of the homeowners I speak to have to weigh the financial impact of their decision to try and stay in their home. Some can not be helped by this plan. Let’s look at the details. To qualify:

• The home must be your primary residence 
• You can not have ownership in any other residenial property.
• Your current mortgage was originated before January 1,2008
• You must have made at least six payments
• Your lender must agree to accept 90% of the current market value

The costs:

• 3% upfront mortgage insurance premium
• Closing costs for the new loan
• Your equity, in the form of equity share
• You can not refinance for five years

If your home is worth $200,000 and the current lender writes off the loan to $180,000, you will have a new FHA loan for $180,000, but FHA owns your equity. Depending on when you sell your home, the equity you receive will be 50% or less. Sell the first year, you receive none of the equity.

• Year two, you receive 20%
• Year three, you receive 30%
• Year four, your receive 40%
• Year five and beyond, you receive 50%

This is a great deal for those who owe more than the $200,000 the home currently appraises for, especialy if they have the money for the upfront fees and plan on staying in their home. My first thought is the plan may be too taxing for many banks, depending on the amount of the original loan versus the current appraised value. If the amount of the original loan for the same $200,000 home is $220,000, the bank will automatically write off $40,000. In Indianapolis, where we did not have huge price increases, this may be a viable option for some homeowners who are facing foreclosure. See the full guidelines here.