The Following is taken from an email from CAMB (California Association of Mortgage Brokers)Summary of H.R. 3221. This is just the beginning and more information will follow.
Participation in the program is voluntary on the part of the existing Lender. No Lender of a distressed Borrower is required to accept the terms of the program.
Requirements for “HOPE FOR HOMEOWNERS PROGRAM”(HOPE loan)
1. Principal residence only;
2. Borrowers certify that they did not intentionally default on the mortgage for the purpose of obtaining the HOPE loan.
3. Borrowers mortgage debt to income (including all existing mortgages) as of March 1, 2008 must be 31% or higher;
4. Calculation of the new loan amount will be based on:
A. Borrower’s ability to make mortgage payments determined by FHA or by other underwriting standards established by the Board; Look for the underwriting criteria to be released; AND
B. LTV limited to 90% of the appraised value;
5. The existing lien holder must waive any prepayment penalties and fees;
6. All existing lien holders (1st and 2nd) must agree to accept the proceeds as payment in full of all indebtedness under the HOPE loan; and all encumbrances must be removed. Look for further guidance on this point as FHA releases the program.
7. Those lien holders of existing subordinate mortgages will be entitled to future appreciation in the property. Standards and policies of the shared appreciation will be developed by FHFA. Factors used to establish this shared appreciation will be:
9. Rate and Term - The new rate will be fixed with a term not less than 30 years;
10. Loan Amount - The new loan amount cannot exceed $550,400.00; which is 132% of Freddie Mac loan limit established in 2007. ($417,000 x 132% = $550,400.00 ) (Page 401) I am not sure how this is going to work in the High Cost Areas, we will need to wait and see what FHA determines.
11. Second Liens - Borrower cannot put a new 2nd lien on the property for 5 years after the refinance takes place; except as FHFA determines to be necessary to ensure the maintenance of property standards and provided the new lien:
A. Does not reduce the Government’s equity in the home; and
B. The CLTV does not exceed 95%.
12. Income Documentation - documented by: Must income qualify.
A. Income tax return transcript for most recent two (2) years, or
B. Copy of Tax Returns for the most recent two (2) years;
13. Mortgage Fraud – the Borrower cannot have been convicted of mortgage fraud under Federal or State law during the past 10 years.
14. Primary Residence – Borrower must supply documentation to prove that the residence being refinanced is their primary residence and is their only residence owned. If the Borrower owns investment property(s), they would not be allowed to participate.
15. Appraisal Independence – No one involved in the transaction can improperly influence or attempt to influence, through coercion, extortion, collusion, compensation, instruction,inducement, intimidation, non payment for services rendered or bribery, the development reporting, result or review of an appraisal sought in connection with the mortgage.
16. Mortgage Insurance Premiums –
A. A 3% up front premium will be paid from proceeds of the mortgage, through the reduction of the amount of indebtedness that existed on the loan being refinanced; and
B. The annual premium will be 1.5% of the loan amount. This loan won’t come cheap; but look what the Borrower is getting – They get to keep their house!
Equity Appreciation – Upon any sale or disposition of the property or subsequent refinance there will be a shared equity appreciation on a graduated scale.
A. Sale or refinance within one (1) year entitles HUD to 100% of the equity appreciation.
B. Sale or refinance within more than 1 year and less than 2 years entitles HUD to 90% of the equity appreciation.
C. Sale or refinance more than 2 and less than 3 years entitle HUD to 80% of the equity appreciation.
D. Sale or refinance more than 3 years and less than 4 years entitles HUD to 70% of the equity appreciation.
E. Sale or refinance more than 4 years and less than 5 years entitles HUD to 60% of the equity appreciation.
F. Sale or refinance within year 5 entitles HUD to 50% of the equity appreciation.
Revised Standards for FHA Appraisers – Beginning October 1, 2008 any FHA appraiser must:
A. Be certified by the State in which the property is located or by a nationally recognized professional appraisal company; and
B. Demonstrate verifiable education in the appraisal requirements established by FHA.
To read HR 3221 in its entirety, click on the link shown below:
HR3221 Bill
