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FHA Hope For Homeowners or FHA Short Refinance?
Many, many people each week call us who currently owe more than their house is worth asking about the FHA Hope For Homeowners program.
The bad news for these homeowners is that the FHA Hope For Homeowners program seemingly doesn’t really exist (not one was done in the month of October in the entire US).
So if you currently owe more than your house is worth and are not late on your payments, you may want to consider another option — an FHA Short Refinance.
An FHA Short Refinance works exactly like a short sale, except you as the current owner stay in your home rather than sell it to someone else. Your current lender agrees to accept less than you owe and you get a new fixed rate FHA loan with an affordable payment.
There are real reasons that lenders are willing to accept a short payoff for an FHA Short Refinance. For example, who would be willing to pay more for the home after a foreclosure: an investor looking for the best deal in town on a foreclosure or the current home owner? Or another possible reason that a lender may be willing to accept a short payoff is for a quick profit on a mortgage they just bought for pennies on the dollar of what you currently owe.
So.
If you owe more than your house is worth, have good credit and are not late on your payments, we may be able to help you get your lender to agree to accept less than you currently owe when you get your new FHA loan.
Before you decide whether or not a FHA short refinance is right for you, be aware that there are fees associated with the transaction regardless if your current lender agrees to write down your principal balance or not. These fees include a credit report fee ($25) and a processing fee ($495) and possibly an appraisal fee ($350) which can all be refunded to you in the form of a credit at closing if we are successful.
There is no guarantee of success and based on what we are learning from our friends who are doing these, we estimate about a 50% chance of success.
If you are interested in learning more about whether or not an FHA Short Refinance is right for you, email or call us and we will get you a packet of information to get you started with the process.
Reverse Mortgage Fees To Decrease Starting November 1
For seniors who are interested in getting a reverse mortgage, starting November 1 they will be able to access more money and pay lower fees thanks to housing legislation passed earlier this summer.
The vast majority of seniors age 62 or older (90%+) who get a reverse mortgage go through the FHA Home Equity Conversion Mortgage (HECM) program. Prior to November 1, seniors could borrow against the lesser of either their home’s value or a limit that ranges from $200,000 to $362,790, depending on location.
But effective November 1, the limit is slated to rise to $417,000 nationwide under the new rules which means that seniors will be able to access more of the equity in their home and turn it into cash.
Another benefit of the recent legislation changes is that seniors who borrow more than $200,000 will pay less in fees when going through the FHA HECM program. Homeowners currently pay a 2% origination fee on HECM reverse mortgages and under the new law, they will pay 2% on the first $200,000 and 1% on the rest with the total origination fees not to be more than $6,000.
Who is should consider a reverse mortgage?
According to Susan Wachter, a professor or real estate at the University of Pennsylvania’s Wharton School of Business:
“There is a niche household a reverse mortgage is exactly right for and that person knows they want to stay in their home until death, and they really need the cash to allow them to do so.”
FHA Hope for Homeowners Program, Is It Real?
More and more people are contacting us asking about the newly-announced FHA Hope for Homeowners program and how to qualify, what will work and won’t work with the guidelines, etc.
The good news is that FHA has issued a few press releases about the program and we have some high-level guidelines to look at as we begin to work with people to help them get qualified.
The bad news is that many lenders and investors have not yet put their guidelines in place and so we caught in this cycle of “maybe this will work” but not knowing for sure and often times many lenders are not sure what they can and can’t do.
As a result, we have yet to *complete* an FHA Hope for Homeowners loan — although we have a few at various stages of the origination process.
Is the FHA Hope for Homeowners program real?
Yes, we think so.
Is Hope for Homeowners the right program for you?
Maybe, maybe not.
Many of the people we talk to may be able to realize more benefit from a short-refinance than they would benefit from a Hope for Homeowners loan and so we are working with lenders to do a short refinance when possible.
How does a short-refinance work?
Think short-sale except for rather than sell your home to someone else for less than you currently owe, you just refinance it and your current bank excepts less than you currently owe.
Short refinance, Hope for Homeowners, loan modification, short sales.
In today’s mortgage world, those are the three most common things that we seem to be talking with people about.
Which one is right for you?
It depends on things like whether you want to live in your home or just get rid of it. Or whether or not you are current on your house payment. Or who your current lender is. Or whether or not you currently could qualify for a new loan.
As always, we are available to share our experience and help you through the process.
FHA Hope For Homeowners Program - How It Works For Arizona Homeowners
We have talked to many people recently about the new FHA Hope for Homeowners program and how it works.
The objective of the program is to help homeowners who are in a negative-equity (they owe more than the house is now worth) situation and may be in a toxic adjustable rate mortgage, get a fixed rate FHA mortgage loan they can afford.
The key elements of the FHA Hope For Homeowners loan program include (this is not an all-inclusive list):
- Your current mortgage payment must be more than 31% of the your gross monthly income.
- You must not have misrepresented your income on your original loan application.
- You must be able to qualify for a new FHA 30-year fixed rate based upon your current documented income.
- You will be required to share in future home appreciation with the FHA.
- The new FHA mortgage loan will be a maximum of 90% of the home’s current appraised value. All second mortgages or any other liens on the property will need to be extinguished — usually meaning that the 2nd mortgage holders will have to agree to a loss of principal.
- The program is completely voluntary; lenders are not required to participate.
If you think you meet the above criteria and decide to engage us to work with you to get qualified, these are the things that you can expect:
Once you confirm that your current lender is participating in the program, the next step is qualify for your new loan. You will need to have documented income and assets, there is no longer such a thing as “stating your income”. Once we have determined that you can qualify for a new FHA fixed rate loan, we will proceed to the appraisal stage.
You will need to pay for an appraisal on your house which is usually between $350 and $400. You will also need to pay for your credit report which is approximately $25. The appraisal is a very important step in the process since the offer to the current lender is going to be based on the current appraised value of your home.
Upon approval by your current lender for them to accept a short-payoff under the Hope for Homeowners program, we will proceed with the loan as normal on our side.
This process is somewhat case-by-case and is not standardized by any means. Each lender is different and has a different process of getting these approved. The biggest key if you are interested in the Hope for Homeowners program is to not delay finding out if your lender is participating and if you can qualify!
FHA Hope For Homeowners Program
When the Housing and Economic Recovery Program of 2008 was passed in late July, we wrote about the Hope for Homeowners Program. Some of the highlights of the program include:
- The program is a voluntary program for lenders to participate in
- Lenders will reduce the amount of money that they are willing to accept to pay off your current mortgage (this has become known as a “short-refinance”)
- A new mortgage will be issued by the new lender based on your current homes value
- FHA will share in the appreciation of the home, not the lender who took the loss
- FHA will collect a 3% “exit fee” when you sell the home or refinance it
Are lenders happy with this program? Ummm…. It doesn’t look like it.
According to the Assistant Secretary for Housing at HUD Brian Montgomery:
“I think lenders will be enthusiastic about the program but they have other things they’d like to do before they do a principal write down”.
What are the signs that lenders are less-than-excited about the Hope for Homeowners program?
- There is no official list published of lenders who are participating in the program
- There is no standardized method of working with these lenders — so each scenario with each lender is handled on an individual basis
- There is growing sentiment among the lenders that any other loss mitigation method (loan modification or workout) is financially better for the current lender than the Hope for Homeowners program
Even Sheila Bair, who heads the Federal Deposit Insurance Corporation, praised the FHA program but said that few borrowers with IndyMac, the bank that the FDIC took over in July, would use it.
She said that her responsibility to maximize profits for the investors would probably limit the number of IndyMac borrowers who would take advantage of the Hope for Homeowners program.
Don’t be surprised if you are interested in participating in the Hope for Homeowners program and you end up getting a loan modification or loan workout from your lender.
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Arizona Mortgage Newsletter
