Under the HOPE for Homeowners Act of 2008, new mortgages that are offered by FHA-approved lenders will refinance abusive loans at a significant discount for homeowners facing difficulty meeting their mortgage payments. The HOPE for Homeowners act will make it possible for certain homeowners to refinance their existing mortgages with a 30-year, fixed-rate FHA loan of up to 90% of their home’s value.  FHA home loans have saved many homeowners from foreclosure with competitive fixed rate loans and FHASecure.

Eligible homeowners are those who originated their FHA loans before January 1, 2008, spend more than 31% of their monthly income on their mortgage, and are currently in danger of foreclosure.

Important Notes:

• The program is completely voluntary. The decision on whether to write such a loan remains up to banks, which would have to be willing to take a loss on the existing loans in exchange for avoiding an often-costly foreclosure.

• If you sell your home after you refinance, you will have to split the equity earnings with the FHA, on a sliding scale basis.

HOPE for Homeowners comes at a time when Wall Street financial institutions are taking huge hits because of their investments in mortgage-backed securities. Many in the housing industry say the law won’t have much impact on the foreclosure rate because FHA lenders are not obligated to participate in the program. However, there is a way to better encourage the lender to accept the program: 

“Be proactive early if you’re getting in trouble,” says mortgage broker Drew Sakson. “Be extremely proactive, and be very early. If you can see that you’re not going to be able to make a payment, call them first.”