Loan Modification Options: Hope for Homeowners

The Hope for Homeowners, or H4H program, is designed to help decrease mortgage payments so homeowners can stay in their homes.

Many Santa Clarita residents are having troubles paying their mortgages, with higher interest rates and smaller paychecks combining to force many families out of their homes. The Hope for Homeowners (H4H) program is one of the available options for refinancing your mortgage into a more affordable payment.

The H4H program has many benefits, but also some pitfalls, so be sure to investigate all available options with your lender before making a commitment to any loan modification program. In order to participate in the H4H program, you must contact your current lender or another FHA-approved lender to start the application process. If approved, you’ll be refinanced into a new 30-year fixed loan at current interest rates, and with a mortgage balance of 90% of your home’s current value.

The H4H program has the following key benefits:

• Your new H4H mortgage will be no more than 90% of your home’s current value.
• The H4H program will replace ALL of your current mortgages.
• Your new interest rate will be based on current rates.

The downside to this program is as follows:

• You must agree to share both the equity created at the beginning of this new mortgage and a portion of any future appreciation in the value of your home.
• You will be required to pay an up-front 3% mortgage insurance payment as well as 1.5% annual mortgage insurance premium on your mortgage balance. The annual premium will be included in your monthly payments.
• You will need to pay closing costs on the new loan, including escrow, title and other fees. You will receive a Good Faith Estimate for these costs.

In order to qualify for the H4H program, both you and your lender must agree to participate. Your lender is not obligated to write down your mortgage to 90% of your home’s current value, and if they do not, then you are not eligible for the H4H program. The H4H program began October 1, 2008 and will continue through September 30, 2011.

If you meet the following qualifications, then the H4H program may be worth looking into:

• You must be asking for a loan modification on your primary residence.
• You may NOT have any ownership interest in any other residential property, including second homes.
• Your existing mortgage must have been originated on or before January 1, 2008.
• You must have made at least 6 payments on your current mortgage.
• You must be unable to pay your current mortgage without help.
• Your monthly mortgage payments must have been more than 31% of your gross monthly income as of March 2008.
• You must certify that you have not been convicted of fraud in the last 10 years.
• You must certify that you have not intentionally defaulted on debts and did not knowingly or intentionally provide false information to obtain your existing mortgages.

The requirement that you must not have “knowingly or intentionally provide false information to obtain your existing mortgages” brings up an interesting dilemma, since many lenders during the recent boom years were encouraging homebuyers to “beef up” their earnings on stated income loan applications in order to qualify. Some of these lenders got their hands slapped for this practice, but the fact remains that many homeowners do have loans that were granted as the result of these inflated earnings statements.

Once you refinance into your new H4H loan, you will not be allowed to obtain a second mortgage for at least 5 years. The only exception to this would be if your home requires emergency repairs.

To read more on this program as well as other FHA programs, visit FHA.gov. You’ll also find more information on the shared equity requirements as well a contact list for Housing Counselors.

There are no fees to apply for a loan modification program, although it may take some time and effort on your part. There are companies that will charge $1,500 or more for this service, so be sure to investigate before you sign up for any of these services.