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HOPE for Homeowners Act of 2008 (FHA Foreclosure Prevention Refinancing Program) Key Provisions for HFAs • Authorizes the FHA to insure refinance loans for distressed borrowers to prevent foreclosures. • Authority goes into effect for mortgage commitments on or after October 1, 2008 and expires September 30, 2011. • Limits the aggregate original principal obligation of all mortgages insured to $300 billion. • Limits mortgage amounts to not more than 90 percent of the appraised value of the property. • Requires existing mortgage holders to accept the proceeds of the insured loan as payment in full for all indebtedness. • Mortgages must bear interest at a single rate that is fixed for the entire term of the mortgage and have a maturity of not less than 30 years. • The principal obligation amount of each mortgage shall not exceed 132 percent of the 2007 FHA mortgage insurance program limit for the area in which the property is located. Other Significant Provisions • Restricts eligibility to mortgages on principal residences. • Creates a Board, composed of the HUD Secretary, the Secretary of the Treasury, the Chair of the Board of Governors of the Federal Reserve System, and the Chair of the Board of Directors of the Federal Deposit Insurance Corporation, to establish program requirements and standards and to provide necessary guidance. Requirements for Insured Mortgages • The mortgagor must lack the capacity to pay the existing mortgage. • The mortgagor must certify that there was not intentional default on the mortgage or other debt and that no false information was used to obtain any eligible mortgage. • The mortgagor must have had a mortgage debt-to-income ratio, including all existing mortgages, greater than 31 percent as of March 1, 2008. • Requires lenders to waive or forgive all penalties for prepayment or refinancing and all fees and penalties related to default or delinquency on the eligible mortgage. • A mortgagor may not grant a new second lien on the mortgaged property during the first five years of term of the newly insured mortgage, with exceptions for second liens necessary to ensure the maintenance of property standards. Second liens cannot reduce the value of the Government´s equity in the borrower´s home and, when combined with the mortgagor´s existing mortgage indebtedness, cause total indebtedness to exceed 95 percent of the home´s appraised value at time of the second lien. • Establishes a 3 percent upfront mortgage insurance premium and a 1.5 percent annual premium for all mortgages insured under this program. • Directs the Board to establish reasonable limits on origination fees and procedures to ensure that interest rates are commensurate with market interest rates. • Establishes an equity-sharing system applicable if a HOPE mortgage property is sold or refinanced within five years, as follows: o Within one year, the Secretary is entitled to 100 percent of the equity. o After one year but within two, the Secretary is entitled to 90 percent of the equity and the mortgagor is entitled to 10 percent. o After two years but within three, the Secretary is entitled to 80 percent of the equity and the mortgagor is entitled to 20 percent. o After three years but within four, the Secretary is entitled to 70 percent of the equity and the mortgagor is entitled to 30 percent. o After four years but within five, the Secretary is entitled to 60 percent of the equity and the mortgagor is entitled to 40 percent. o After five years, the Secretary is entitled to 50 percent of the equity and the mortgagor is entitled to 50 percent. HOPE Fund • Establishes within FHA a revolving fund called the Home Ownership Preservation Entity (HOPE) Fund to be used for mortgage insurance obligations. • Requires the Board to submit monthly reports to Congress identifying progress of the HOPE for Homeowners Program. • Authorizes Ginnie Mae to guarantee securities based on and backed by a trust or pool composed of HOPE mortgages. • Authorizes HUD to insure mortgages under this program effective for commitments made on or after October 1, 2008 and on or before September 30, 2011. |