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H.R. 3221 DIVISION A - TITLE IV – HOPE FOR HOMEOWNERS
GENERAL - The legislation creates a voluntary program that would permit FHA to refinance
up to $300 billion in loans, providing guarantees on refinanced loans to assist at-risk borrowers
into viable mortgages.
PARTICIPATION - In order to participate, a borrower or existing loan servicer of an eligible
loan would contact an FHA-approved lender, who would determine the size of a loan that would
be consistent with the requirements of the program and that the borrower could reasonably
repay. If the current lender or mortgage holder agrees to a write-down to 87 percent of the
current appraised value of the property (90 percent minus a 3 percent origination fee), the FHAlender
will pay off the discounted existing mortgage from the proceeds of the new, FHA
guaranteed loan.
ELIGIBILITY REQUIREMENTS FOR EXISTING LOANS:
Mortgage must be for owner-occupied principal residences (no investors, speculators or
second homes), and borrowers must certify that they do not own any other homes.
Mortgage must have been originated on or before January 1, 2008. Borrower must
have a mortgage debt to income (DTI) ratio of not less than 31 percent as of March 1,
2008, but this DTI can be set higher by the Oversight Board. Borrowers must certify that
they have not intentionally defaulted on existing mortgage(s). Borrowers must
acknowledge that any willful false statement relating to this provision is punishable by
fine or imprisonment of not more than five years, or both.
ELIGIBILITY REQUIREMENTS FOR PARTICIPATING HOLDERS/INVESTORS OF
EXISTING LOANS:
Participating mortgage holders/investors must waive any penalties or fees on the existing
mortgage and must accept proceeds of the new loan as payment in full; and
Agree to fund a single premium payment in an amount equal to 3 percent of the amount
of the principal obligation of the new loan, funded by reducing the indebtedness on the
original loan. This calculation brings the payout to the existing loan holder to 87 percent
of the property‘s current appraised value.
ELIGIBILITY REQUIREMENTS FOR NEW FHA-INSURED LOANS:
New FHA loans must be properly underwritten and must be based on current appraised
value of the house and borrower‘s documented income. The new loan cannot exceed 90
percent of the appraised value of the property. Oversight Board can set DTI higher than
the 31 percent in the legislation.
Borrowers must agree to pay an ongoing annual premium in an amount equal to 1.5
percent of the amount of the remaining principal balance of the mortgage.
New loans must be at a fixed rate and for a term of not less than 30 years.
AMERICAN BANKERS ASSOCIATION 7