Hope For Homeowners Act Of 2008

Homeowners struggling to avoid foreclosure have a potential new lifeline: Hope for Homeowners, outlined yesterday by the Department of Housing and Urban Development to allow strapped borrowers to refinance their mortgages into federally insured lower-rate, 30-year fixed loans.

Though borrowers must meet several requirements, their lenders must first decide to participate in the program, which aims to help about 400,000 homeowners.

To be eligible, the borrower's home must be the primary residence; the mortgage must have originated on or before Jan. 1, 2008; and as of March 2008, an applicant's mortgage payment must account for more than 31 percent of gross monthly income.

"This program is designed to keep people in their homes and stabilize communities that might otherwise deteriorate in the event of massive abandonments," said Adam Glantz, regional spokesman in the Manhattan HUD office.

But, it's not a sure thing. The mortgage servicer must be willing to take a loss and write down the loan - insured by the Federal Housing Administration - to 90 percent of the home's current appraised value. If the home is sold, the homeowner must agree to share any appreciation with the FHA and the refinancing lender. The program, authorized by the Economic and Housing Recovery Act of 2008, will be in effect through Sept. 30, 2011.

"Without a doubt, banks don't want to foreclose," said Peter Marino, president of Green Street Financial Group, a mortgage broker in Garden City. He said he thinks that banks and mortgage servicers will participate in the program, preferring, for example, a $20,000 hit with a write-down to a $50,000 loss that could come with foreclosure.

But Austin King, executive director of ACORN, the Association of Community Organizations for Reform Now, questioned lenders' willingness to participate. Thus far lenders and mortgage servicers, he said, have been "loathe to take a haircut," that is, a write-down of principal, preferring to "tinker with interest rates."

King advises homeowners who think they may be eligible for the program to contact area nonprofit housing counselors who can help them make a case with their mortgage servicers or explore other options. King also suggests that those who try contacting the servicer themselves make sure to speak with the loss mitigation or loan solutions department.

Avoid talking to the collections department, he said. "They're only authorized to take your money."

THE RULES

Hope for Homeowners requires that certain eligibility criteria be met:

The home must be the applicant's primary residence

Applicants cannot own or have an ownership interest in other property such as a second home

The mortgage must have originated on or before Jan. 1, 2008

At least six payments must have been made

Applicants are not able to pay the existing mortgage without help

Applicant cannot have been convicted of fraud in the past 10 years

Applicant did not knowingly provide false data when applying for the mortgage

The refinanced loan may not exceed $550,440

New mortgage cannot exceed 90 percent of the home's new appraised value

Homeowner must agree to share future appreciation in home value with the Federal Housing Administration and the refinancing lender

Homeowner cannot take out a second mortgage for five years, except for emergency repairs

More program details are available at www. Hud.gov/hopeforhomeowners

Source: Department of Housing and Urban Development