HOPE for Homeowners will provide another resource to the Federal Housing Administration's (FHA) existing efforts to aid struggling homeowners. Under the program, borrowers having difficulty paying their mortgages will be eligible to refinance into FHA-insured mortgages they can afford.

For borrowers who refinance under HOPE for Homeowners, lenders will be required to "write down" the size of the mortgage to a maximum of 90 percent of the home's new appraised value. In many instances, lenders will determine that such a reduction in principal will allow them to avoid a costly foreclosure, while helping borrowers stay in their homes.

HUD strongly encourages borrowers to work with their current lender to determine if HOPE for Homeowners is the right program for them. Lenders should explore all options, including HOPE for Homeowners, before issuing foreclosure notices. For lenders, this voluntary program will serve as another loss mitigation tool that can be used to help families keep their homes.
Sustainable, Affordable Homeownership

HOPE for Homeowners will only offer 30-year fixed rate mortgages - so the borrower's last payment will be the same as the first payment. Further, this program will maintain FHA's long-standing requirement that new loans be based on a family's long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.
Consistent with statutory requirements, borrowers must also meet the following criteria:

• Their mortgage must have originated on or before January 1, 2008;
• They cannot afford their current loan;
• They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments;
• They do not own a second home;
• Their mortgage debt-to-income must be at least 31 percent;
• They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years;
• They must follow FHA's long-standing and strict policy of fully documented income and employment.
• Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.
• To participate, existing subordinate lenders must agree to release their outstanding mortgage liens.

The new HOPE for Homeowners mortgage payment must be at or below 31 percent of the borrower's income, unless there is "trial modification" period prior to loan application. A trial modification would give borrowers the opportunity to demonstrate their capacity and willingness to make a mortgage payment that does not exceed 38 percent of their monthly income.

Funding
FHA will insure up to $300 billion in new loans.

Program Timeline
The program will last from October 1, 2008 through September 30, 2011.

Voluntary Lender Participation
FHA will continue to offer lenders an alternative to foreclosing on borrowers. Similar to FHASecure, lenders will be required to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Homeowners In Need Should Act Now
While lenders are gearing up to offer this new program, families should not wait to seek mortgage relief. Right now, homeowners can determine if they are already eligible for mortgage assistance through HOHC.