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New FHA loans under this program may not exceed 132 percent of the 2007 Freddie Mac
limit (for a maximum program limit of $550,000).
The FHA will retain a share of the borrower‘s future profits. When the borrower sells the
home or refinances the loan, the borrower will pay from any profits the higher of a
declining percentage of any net proceeds attributable to home appreciation (i.e., from 100
percent in year one to 50 percent in year five and thereafter minus the fees the borrower
has paid into FHA).
Borrowers will be prohibited from taking out a second mortgage on the property for five
years, except as determined necessary by the Board for maintenance of the property. Any
such second liens cannot reduce the value of the Government‘s equity in the property.
Total loan to value on the property (combining existing mortgage indebtedness and the
second lien) cannot exceed 95 percent.
OTHER PROGRAM DETAILS:
Oversight Board. The program will be overseen by a ―Refinance Program Oversight Board‖
consisting of the Secretary of Treasury, the Secretary of HUD, and Chairman of the FDIC.
Existing Lien-Holders and Shared Appreciation for Second Lien Holders. The Oversight
Board will be authorized to allow existing second lien-holders to share in future appreciation in
value and shall be empowered to establish a formula for compensating second lien holders. The
Board is also given authority to take actions to facilitate and coordinate agreements among
existing lien holders.
Separate FHA Fund. To protect the FHA Mutual Mortgage Insurance Fund, these new loans
will exist in a separate fund in FHA – and will be permitted to be resold through GNMA, with a
maximum of $300,000,000,000 to be insured.
Improving FHA Capacity. The Oversight Board will take actions as necessary to increase
FHA‘s capacity including contracting for the establishment of underwriting criteria, pricing
standards, and other factors relating to eligibility; and increasing HUD personnel.
Auction or Bulk Refinance. The Oversight Board is required to conduct a study regarding the
creation of an auction or bulk refinancing mechanism for mortgages on a bulk basis. The Board
must issue a report within 60 days of enactment of this section.
Appraisals. The bill requires enhanced appraisal standards and appraiser independence for
loans originated under the program.
Sunset. The program sunsets after September 30, 2011.
Fiduciary Duty of Servicers of Pooled Mortgages. The bill contains a provision intended to
provide servicers with a safe harbor from investor lawsuits if a servicer engages in loan
modifications or refinancings pursuant to the HOPE for Homeowners Program.
AMERICAN BANKERS ASSOCIATION 8