HOPE for Homeowners Act of 2008
H.R. 3221, as amended, would include the HOPE for Homeowners Act of 2008, which would create a new, temporary, and voluntary program within the Federal Housing Administration (FHA) to back FHA-insured mortgages to distressed borrowers. These new mortgages offered by FHA-approved lenders would refinance distressed loans at a significant discount for owner-occupants at risk of foreclosure.
Guided by five basic principles -- long-term affordability, no investor or lender bailout, no windfall for borrowers, voluntary participation, and restoring confidence, liquidity, and transparency to markets -- the program would require that:
⢠Borrowers certify that they have not intentionally defaulted on their mortgage or any other debt and, as of March 1, 2008, the borrower had a mortgage debt to income ratio of more than 31 percent;
⢠Borrowers be owner-occupants and not investors, and investor properties cannot be refinanced;
⢠The new loan be a 30 year, fixed-rate mortgage for an amount the family can repay or 90 percent of the current value of the home, whichever is less;
⢠All subordinate liens be extinguished through negotiation with the first lien holder, and all holders receive a portion of any future appreciation of the property;
⢠The maximum loan limit not exceed 132 percent of the Federal Home Loan Mortgage Cooperation Act limit;
⢠Borrowers not grant a new second lien on the home within the first five years of the new, refinanced loan; and
⢠The borrower share the newly-created equity and future appreciation equally with FHA until such time as the borrower sells the home or refinances the FHA-insured mortgage, and the borrower's access to the newly-created equity be phased-in over five years.
H.R. 3221, as amended, would authorize the program to insure up to $300 billion in mortgages. The program would be paid for, in part, by the Affordable Housing Trust Fund, but the legislation (in the Federal Housing Finance Regulatory Reform Act of 2008 title) would provide an additional $2 billion cushion to establish a reserve fund at the Treasury Department over ten years.
The HOPE for Homeowners Program would be overseen by a Board consisting of the Secretary of Housing and Urban Development, the Secretary of the Treasury, the Chairman of the Federal Reserve Board, and the Chairman of the Federal Deposit Insurance Corporation (FDIC).
The program would begin on October 1, 2008 and sunset on September 30, 2011.
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