The federal government recently enacted legislation to try to help homeowners who are in danger of foreclosing on their homes, but an area mortgage advisor said some families are encountering difficulty in taking advantage of the new program.
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The Federal Housing Administration’s HOPE for Homeowners program, authorized as part of the Economic and Housing Recovery Act of 2008 that was signed into law July 30, was implemented Oct. 1 with plans to provide aid to those who are struggling to make their mortgage payments.
Jeff Marsack, a mortgage broker at Great Lakes Mortgage Funding in Sterling Heights, is a lender trying to spread the word about the program - but he has hit a snag because homeowners have to be approved for HOPE for Homeowners through their current servicing lender, which usually isn’t him.
“Ideally, the homeowner is supposed to call up their bank and their bank should be able to (seek approval) for them internally,” Marsack said. “If the bank wouldn’t do it, they would have to give their blessing for another bank to do it and we’ll take the loss. All the banks we’ve come into contact with have said, ŚWe’re not participating,’ and ŚWe’re not going to let you go out and do that with another lender.’”
The HOPE for Homeowners program permits a qualified homeowner to refinance their existing home loan to a new 30-year fixed-rate mortgage insured by the FHA, as long as the homeowner meets specific criteria and their current mortgage lender approves the deal - a deal which could mean a loss of money for the lender.
Marsack said the voluntary program allows homeowners to refinance their mortgage into a new loan for an amount equal to 90 percent of their home’s current value. Therefore, any amount on the existing mortgage that is more than 90 percent of the home’s worth would have to be written off by the existing lender.
“That being said, they’re going to take a loss no matter what because these people are going to lose their home and face foreclosure,” Marsack said.
Another option for homeowners facing foreclosure is a short sale, which incorporates the same concept as HOPE for Homeowners and where the lender takes a loss. However, the homeowner must vacate their home with a short sale while HOPE for Homeowners allows people to stay in their homes.
“To me it seems like it’s a godsend for thousands of people,” Marsack said.
Mary Kay Bean, a spokeswoman for Chase Bank in Michigan, said Chase just received the information on HOPE for Homeowners on Oct. 1 and is reviewing it. She said Chase is taking steps to implement the program, but it would still be a few more weeks before the lender is ready.
“Chase strives to keep families in their homes, whenever possible,” Bean said. “We evaluate modification and refinancing possibilities by reviewing information the customer has provided about their earnings, expenses and assets. That helps us determine what options may be viable.”
Likewise, Flagstar Bank First Vice President Tom Klar said his company is researching all aspects of HOPE for Homeowners while trying to evaluate the liability of the program.
“We’re trying to see how many customers would qualify for it,” Klar said. “We’re committed that if we can do them, we are going to do them.”
However, Klar said a good amount of Flagstar’s clients might not be qualified because of another lender holding on to their mortgage.
“If your loan is operated by Frannie Mae or Freddie Mac, which most loans are, then we won’t be able to help the customer,” Klar said.
Marsack, who has been a full-time mortgage broker for 15 years, said he has seen the amount of foreclosures increasing over the past 24 months. “It’s a continual downward spiral,” Marsack said.
Many of the residents who have approached Marsack with their difficulties getting approved for HOPE for Homeowners have expressed dismay over the recent $700 billion federal bailout package.
“The bailout in and of itself had nothing to do with this program,” Marsack said. “But here we are, as a country, bailing out the banking industry - but we can’t help people in Macomb County. We won’t bail out homeowners, but we’ll bail out the industry.”
Homeowners who have already entered into the foreclosure process aren’t eligible for the HOPE for Homeowners plan. To qualify, homeowners are subject to various criteria - the home has to be their primary residence, they can’t have other residential property, the existing mortgage had to originate before Jan. 1, 2008, and at least six payments had to have been made on the mortgage. In addition, the total monthly mortgage payments due must be more than 31 percent of the homeowners’ gross income. Other requirements must also be met.
To take advantage of refinancing a new FHA-backed mortgage with the HOPE for Homeowners program, the homeowner must also agree to share with the FHA the equity created at the beginning of the new mortgage, plus any future appreciation of the home. Additional stipulations apply in the program.
For more information about HOPE for Homeowners, visit www.fha.gov/hopeforhomeowners
For additional FHA information, call 800-569-4287.
