There are four distinct ways that an overwhelmed homeowner can can participate in the FHA Mortgage Loan program:



1.Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program.

2.Loan Specialists working with troubled homeowners may decide that the most optimal solution in avoiding foreclosure is to refinance the homeowner with a Hope for Homeowners mortgage loan.

3.Originating lenders who are looking for new ways to refinance potential customers out from under their expensive loans and/or who are eager to cooperate with servicers to assist distressed homeowners.

4.Loan Advisers who are working with troubled homeowners and their lenders to reach a cooperatively agreeable result for obviating foreclosure.

It is envisioned that the primary way homeowners will initially participate in this program is with the help of a lender on their pre-existing mortgage. Loaners that do not have an underwriting component to their mortgage enterprises can partner with an FHA-approved lender that does.

Step 1:Affordable Analysis Lender applications:

Given their financial obligations and depositary responsibilities, lenders will assess their portfolio and create a cost-benefit analysis to determine the utility of offering this program to struggling homeowners.

1.Affordability vs value: lenders will take a deficit on the difference between the existing obligations and the new loan, which is set at 90 percent of current appraised value. The lender may choose to provide homeowners with an affordable monthly mortgage payment through a loan modification rather than accepting the losses affiliated with decreasing property values.

2.Borrower qualification: Lenders that decide the H4H program is applicable and effective option for mitigating losses will assess the homeowner’s qualifications for the program:

oThe present mortgage has been active ON or BEFORE the 1st of January, 2008;

oExisting mortgage payment(s) as of The 1st of March 2008 is over 31 percent of the borrower’s gross monthly income;

oThe homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been in trouble with the Federal and/or state law for fraud within the last ten years; and

oThe homeowner did not provide materially fraudulent information (i.e., lied about income) to receive the mortgage that is being refinanced into the Hope for Homeowners mortgage.

Consumer contemplations: The lender will disclose to the homeowner the benefits of the program:

·Home retention,

·ten percent equity

·New cost-efficient mortgage based on current appraisal.

The lender will also disclose to the homeowner the prices of the program:

·1.5% annual premium and a 3 percent upfront mortgage insurance premium,

·Equity and appreciation sharing with the US government, and

·Prohibition against new junior liens against the property unless they are directly related to property maintenance.

Step 2: Negotiations Between Mortgage Holders and Borrowers If the lender refinancing the mortgage does not hold the senior mortgage lien, it will need to secure a settlement from the existing lien holder to dismiss all prepayment fines and default fees on the present loan and accept the loan proceeds from the Hope for Homeowners mortgage loan as payment in full. The loan amount (with the three percent UFMIP) for the new H4H loan cannot go over 90%ninety percent of the existing appraised value of the property. The lender will employ current subordinate mortgage lien holders to extinguish all subordinate liens on the subject property. To entice subordinate lien holders to take part in the negotiation process and relinquish their liens, FHA has the right to share its future appreciation entitlement with them.

Step 3: Originating an H4H Mortgage:

The lender will make qualifications the homeowner for the new H4H mortgage using the guidelines launched under the conditions of the program’s unique constitutional conditions, guaranteeing that the property owner has the capability to make the new payment on the H4H mortgage on time. During financing of the loan, the lender will calculate the future growth interest amount for each subsidiary lien holder in agreement with instructions provided by the FHA. At settlement, subordinate lien holders will receive a certificate that shows their interest as an debt backed by HUD, with payment conditional on the worth of HUD’s appreciation division. Following funding of the loan the lender will take down – in addition to the regular security instrument and note for the first mortgage – a divided equity note and mortgage (SEM) and a mortgage (SAM) and a shared appreciation. FHA will service these mortgages. The lender will also submit the new mortgage for insurance to FHA, verifying that it has been created, underwritten and closed in accordance with the H4H program guidelines.

Step 4: Completeing H4H Mortgage Requirements

Upon sale of the property, the homeowner will apply their sale proceeds to pay off the H4H mortgage as well as the shared appreciation mortgages and shared equity. FHA will provide procedures to the settlement agents regarding subsidiary lien holders who are accredited to a portion of any indebtedness. The lien holder that formerly held the highest priority will get payment up to the full dollar amount of its interest, not to exceed the amount of ready appreciation, and so on, until all previous lien holders are content or the amount of available appreciation is consumed. All remaining appreciation is forwarded to FHA. In cases where the homeowner failed to make the first payment on their new H4H mortgage, the H4H act prevents FHA from paying claim benefits to any person holding the mortgage.