Mortgage Lender Participation
FHA will continue to offer mortgage lenders a better refinancing option than foreclosing on borrowers. Similar to a loan modification or the FHASecure refinance loans, FHA lenders will be encouraged to write-down the outstanding home loan principal balances to 90% of the new value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.
Market Stability and Liquidity
By continuing to fight the foreclosure rate, this HOPE for Homeowner loans will support FHA’s existing effort to stabilize local housing markets. From September 2007 to June 2008, FHA home loans have guaranteed more than $93 billion of mortgage capital.
Mortgage Funding
FHA will insure up to $300 billion in new FHA refinance loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5% of the outstanding mortgage amount. Any further costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac.
Loan Program Timeline
The program will last from October 1, 2008 through September 30, 2011. Since September 2007, FHASecure has aided more than 290,000 families with more affordable fixed rate mortgage loans FHASecure is on pace to help 500,000 families by the end of 2008.
