[admin]

Hope For Homeowners (H4H) is a crock. It will not help the majority of us because if we had the cash required to utilize this program, we wouldn't be in foreclosure in the first place.

Yes, it will help people who are upside down on their loans, IF they have access to cash (lots of it), and can afford a fairly hefty mortgage payment.

Here are some facts: FHA will allow a homeowner to refinance up to 90% of the value of their home (up to a maximum loan amount of $550,440) if the current lender agrees to waive the deficiency balance. If there is a second trust deed, it is wiped out. This 90% includes the Up Front Mortgage Insurance Premium (UFMIP), which will be 3.00% for the H4H program. So in actuality, the maximum loan is 87% of the appraised value and FHA gets the other 3%. This means that the homeowner must pay 13% of the property value plus closing costs and impounds as FHA requires the taxes and insurance be included with the payment. The monthly insurance premium (MIP) is 1.5% and the Up Front MIP (UFMIP) is 3%, compared to monthly MIP of .55% and UFMIP of 1.75% for a standard FHA loan (the standard monthly was .5 and UFMIP 1.5% until recently).

On top of the increased insurance premiums charged by FHA, the lender will charge points based on several factors – for example, there is a 2.5% hit for the FHA Secure loan (I imagine the hit for the H4H loan will be much higher), and hits ranging anywhere from .5% to 2% or more for your credit score, which will be very low since you are late on your mortgage.

So let’s say Joe Blow has good credit and wants to buy a home with an FHA loan. Joe’s interest rate on a 30-year fixed rate mortgage would be 5.5% at par (0 points for the rate). If the sales price is $300,000, Joe’s total cash requirement (including down payment, closing costs, and impound account) will be about $19,600, the loan amount will be $291,000 ($295,365 with the UFMIP of 1.75%), and Joe’s total monthly payment will be around $2,211.94.

Now let’s say Henry Homeowner uses the H4H program to save his home which is worth $300,000. Henry’s loan amount will be $261,000 ($268,830 with the UFMIP of 3%). Total cash to close will be about $49,300, interest rate 7%, and Joe’s total payment will be approximately $2,503.41 (even though it’s a much lower loan amount) per month. This is because of the increased FHA insurance fees, and points charges due to Henry’s credit score and this loan program.

Now let’s say Henry wants to get the standard FHA rate of 5.5% to bring his payment down. In that case, Henry will pay an additional 3.5% in points for his credit score and the H4H program (I’m basing this on the 2.5% fee for the FHA Secure program and a 1% fee for a credit score in the 500 range - the H4H cost may be much higher). So to get the same 5.5% Joe is getting on a regular FHA loan, Henry’s cash requirement just jumped to $58,500 with the H4H loan. But even though Henry got the same 5.5% as Joe and Henry’s loan amount is smaller, Henry’s payment is $2,241.27 compared to Joe’s of $2,211.94 because Henry is paying 1.5% monthly MIP and Joe is paying .55% monthly MIP.

This program simply won’t work because not only do we not have the cash lying around that will be needed for this program, many times our payments will actually increase instead of decrease. Not only that, but we have to somehow talk our lenders into “magically” erasing our deficiency balances and making our seconds disappear. Yeah, right.

This is another load of BS wrapped up in a neat little package to make us all believe someone is actually doing something to help us. All I know is that if I had access to $50,000, I wouldn't be in foreclosure!