HOPE for Homeowners Act on its Way

Posted on November 6, 2008
Filed Under Foreclosures |

Millions of American homeowners are either in foreclosure or heading quickly toward it, and many of them are desperately searching for someone or something to help them save their homes and get back on their feet.

Many homeowners are seeking out financial counselors to help negotiate better agreements with their lenders which might actually save some of their homes, but come October 1 the federal government is stepping up to the plate with the “HOPE for Homeowners Act.” The HOPE act is a part of the Housing and Economic Recovery Act of 2008 and may bring some sense of relief to select homeowners who meet their strict financial qualifications.

The act will consider working only with homeowners who have already fallen into foreclosure or those who are heading in that direction in the close future. If they meet a list of other qualifications, these homeowners could be permitted to refinance their mortgages into something with more affordable terms. These new mortgages will also be insured by the Federal Housing Authority.

While many people will apply for help under this act in hopes of saving their homes, it might not offer any help at all to a large number of the applicants. The downfall to the HOPE act is the strict set of requirements that homeowners must meet in order to be considered.

These are the qualifications:

The current home loan must have been issued between 2005 and 2007. This is the period of time in which a large number of sub-prime and interest only loans were given out to homeowners who really could not afford the loans.
The home must be the owner’s primary residence.
Income statements and tax records must be presented to establish proof that the mortgage is no longer affordable on the owner’s income.

A lot of homeowners facing foreclosure will be eliminated from help just from the first requirement. Those in threat of losing homes which are rental properties or second homes will not get any help from this act either. The third requirement is up to the interpretation of whoever evaluates the income statements and tax records, and their opinion of what is affordable on the homeowner’s income.

One last obstacle is that the lender must approve of the buyer’s refinancing and work with the process.

For those homeowners who can pass all of these qualifications, they will refinance into a 30-year fixed rate loan to be set at up to 90% of the home’s appraised value. All current penalties and late fees will be wiped away. It’s a great deal for those who can get it.

The new federal act will not bail out all homeowners’ currently in foreclosure or on the road to future financial meltdown, but it might allow the select few to save their homes. It will also save lenders from losing money on even more failed mortgages.