Hope for Homeowners
How Does the HOPE Act Help?
On June 10th, 2011, HUD issued Mortgagee Letter 11-20. The letter provides instructions as to how to process cases during the phasing out of Hope For Home Owners (H4H) program. This program was authorized under the Housing and Economic Recovery Act of 2008. This program was effective for endorsements on or before September 30, 2011.
When the sub-prime mortgage crisis reached its peak in the fall of 2008, the federal government took steps to help stabilize the American housing market. The Emergency Economic Stabilization Act of 2008 was signed into law on October 3, 2008. Part of that new law includes a requirement to help qualified homeowners avoid foreclosure through federal loan guarantees and credit enhancements.
The HOPE for Homeowners act is designed to prevent qualified home owners from defaulting on their loans, and avert foreclosure. This is done through refinancing into affordable, fixed-rate mortgages.
If you are in danger of defaulting on your home loan, it is very important to contact your lender immediately and request an evaluation of your situation. If you are able to qualify, your loan officer can help you begin the paperwork to prevent foreclosure. If you are already in discussions with the bank, your loan officer may suggest HOPE for Homeowners as a way to proceed.
Am I Eligible?
Homeowners may be eligible for HOPE for Homeowners program if they meet the following criteria as specified in the HOPE for Homeowners act 2008:
- The original mortgage is dated on or before January 1, 2008
- The homeowner did not default on the original loan intentionally
- The homeowner is not invested in multiple home loans
- All information on the original mortgage is true (including income sources and job details)
- The homeowner has not been convicted of fraud
HOPE for Homeowners is not a simple refinancing program. While it does allow qualified borrowers who are stuck in variable-rate mortgages to refinance into affordable, fixed-rate mortgages, there is a trade-off known as equity sharing.
What is Equity Sharing?
Those who apply and are accepted for the HOPE program must agree to an equity sharing program. Equity is the difference between the amount of your original loan and the actual value of the home; if you sell or refinance your home after entering the HOPE program, under the terms of HOPE you are required to share any equity with the FHA. How much the government receives depends on how long you wait to sell or refinance. If you sell in the first year of your participation in HOPE, the government receives 100% of the equity. There is a sliding scale after the first year;
- Year two—homeowners can keep 10% of the equity, FHA gets 90%
- Year three—homeowners keep 20%, FHA gets 80%
- Year four—homeowners keep 30%, FHA gets 70%
- Year five—homeowners keep 40%, FHA gets 60%
After year five, homeowners split the equity from sale or refinancing 50/50 with the Federal Housing Administration. If there is no equity or negative equity at the time of sale or refinancing, the FHA receives nothing.
What are the Benefits of Hope?
The benefits of participating in HOPE for Homeowners include;
- Keeping your home
- Getting a 30-year fixed-rate mortgage (extendable to 40 years in some cases)
- Lower monthly mortgage payments which do not change
The 30-year loan is extendable in some situations. Extending the terms to 40 years is helpful in cases where the homeowner has a large amount of debt; the 40-year term reduces mortgage payments further. There are requirements and restrictions on these extended loans. Check with your lender to see if you qualify for the 40-year loan terms under the HOPE program.
The HOPE for Homeowners program ran until September 20, 2011.

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