Mortgage Loan Modification With The FHA Hope For Homeowners' Program

The Housing and Economic Recovery Act of 2008 created a new, Federal Housing Administration (FHA) mortgage insurance program called the HOPE for Homeowners Program (also referred to as the H4H Program). Under the Program, a borrower facing difficulty paying his or her mortgage will be eligible to refinance into an affordable FHA-insured mortgage.
Here is how it works. You are eligible if you have not intentionally defaulted on your mortgage or any other debt; you have not been convicted in State or Federal Court of fraud within the past 10 years; you did not willfully or knowingly furnish materially false information to get your current mortgage.
There are some special conditions that you must agree to in order to get the FHA loan. You must agree to share the equity and future appreciation with the FHA; That you cannot take out a second mortgage, home equity loan or home equity line of credit for five years except under special circumstances to make emergency repairs; and, that you will pay a 3% up-front mortgage insurance premium and a 1.5% annual mortgage premium on your current principal balance of the new mortgage. The annual premium is included in your monthly payments. Here is an example of how the program will work.
This is an example of how the unique equity and appreciation sharing elements of this program work. Keep in mind that this is only one example, and your actual experience will depend on many things, including how much your home increases or decreases in value. Additional examples and details about how the equity and appreciation in your home is calculated can be found at www.hud.gov.
Suppose that your home, at the time you refinance into an FHA mortgage is worth $200,000. You owe $180,000 and have $20,000 in equity. You and FHA would share this $20,000. The way it would be split depends on how long you stay in the house.
If you sold during Year 1, FHA would keep 100% or $20,000 and you would get nothing.
During year 2, FHA would keep 90% or $18,000 and you would get $2,000.
During year 3, FHA would keep 80% or $16,000 and you would get $4,000.
During year 4, FHA would keep 70% or $14,000 and you would get $6,000.
During year 5 FHA would keep 60% or $12,000 and you would get $8,000.
After year 5, FHA would keep 50% or $10,000 and you would get $10,000.
In addition to this equity sharing, you will have to share any future home price appreciation with the FHA. This means that, if your home has gone up in value between the time you receive your FHA mortgage and the time of your home sale (or other disposition), you will share the amount of this increase with the FHA (less closing costs and a portion of any improvements you have made).