Hope For Homeowners Program Designed to Provide Aid to Distressed Borrowers

The government starts the mortgage loan swap which lets troubled homeowners stay in their homes. Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth. To qualify, borrowers must be spending more than 31% of their income on mortgage payments. Loans made this year are excluded, except for those completed on Jan. 1. Borrowers must have made six months of payments on their loans


Here is the gist of the act:


The “HOPE for Homeowners Act of 2008" creates a new program within FHA to back FHA-insured mortgages to distressed borrowers. The new mortgages offered by FHA-approved lenders will refinance abusive loans at a significant discount for homeowners facing difficulty meeting their mortgage payments.

The program is built on five principles:
Long-term Affordability. The program is built on the idea, expressed by Federal Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable homeownership.
No investor or lender bailout. Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance. However, these losses would be less than the losses associated with foreclosure.
No windfall for borrowers. Borrowers will share their new equity and future appreciation equally with FHA. Borrowers will pay for the FHA insurance.
Voluntary Participation. This will be a voluntary program. No servicers will be compelled to participate.
Restore confidence, liquidity, and transparency. Credit markets are fearful and frozen in part because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth. This program will create certainty and get markets flowing again.

Program Administration. The new program will be overseen by a Board made up of the Secretary of HUD, the Secretary of the Treasury, and the Chairman of the Federal Deposit Insurance Corporation (FDIC). The Board will have the authority to develop standards within the framework of the legislation.

Eligible Borrowers. Only owner-occupants will be eligible for the new FHA-insured mortgage. No investors or investor properties will qualify. The Board will establish other eligibility criteria, including criteria designed to determine whether borrowers can afford their existing loans.

New Loan Amount. The size of the new FHA-insured loan will be determined by:
The lesser of the amount the borrower can afford to repay, as determined by the current affordability requirements of FHA, taking into account the amount of income available to the family after basic expenses are paid (residual income); or,
The amount of the existing loan minus a discount established through an auction process established by the Board. The auction process will allow for bulk refinances, at a discount, of eligible loans. The federal government will not take possession of the mortgages.
The Board will have flexibility to change the affordability standards to suit circumstances.
In either case, FHA will not insure more than 90% of the current value of the home. Loans must be 30-year, fixed rate loans.

Equity Sharing. In order to avoid a windfall to the borrower created by the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly-created equity and future appreciation equally with FHA. This obligation will continue until the borrower sells the home or refinances the FHA-insured mortgage. Moreover, the homeowner’s access to the newly created equity will be phased-in over 5 years.

Existing Subordinate Liens. Before participating in this program, all subordinate liens must be extinguished. This will have to be done through negotiation with the first lien holder.

Qualified Safe Harbor. The legislation provides servicers with an incentive to participate in the program by offering a safe harbor against legal liability.

Funding. The Act provides for $20 billion in credit subsidy, which is expected to insure new, affordable loans that refinance approximately $400 billion in troubled mortgages.

Program Sunset. The program sunsets at the end of 2012. Any remaining funds, and future collections resulting from appreciation of FHA-insured mortgages made under this program, will be returned to the government.

New Foreclosure Prevention Affordable Housing Goal for Fannie Mae and Freddie Mac. In addition to the FHA option, the legislation requires the Secretary of HUD, together with the Secretary of the Treasury and the Director of OFHEO, to establish a new Foreclosure Prevention goal for Fannie Mae and Freddie Mac. The two enterprises would be required to purchase eligible loans at a discount, and write down those mortgages to help the families keep their homes. Mortgages would have to be written down according to the same criteria as loans eligible for FHA insurance under this legislation – based on ability to pay, taking residual income into account. OFHEO would be given the authority to require the enterprises to raise additional capital commensurate with the additional risk this new goal may pose.

Angela Bassett and Courtney B. Vance's Home is For Sale: Get to Know The Home

Are you ready to buy this home for $6 million? It is worth every penny. Find out why the couple is selling. They have twins through a surrogate. So they have more needs.

The compound they are selling has a 5,000-square-foot main house, built in 1940, with five bedrooms and six bathrooms. It has such features as a hair salon, a gourmet kitchen, an elegant foyer, a master-bedroom suite and parklike grounds. The couple added a detached 2,500-square-foot building that has an office, gym and guest quarters.

Who is Angela Bassett?

Bassett, whose breakthrough role was playing Tina Turner, starred opposite Laurence Fishburne in the movie "Akeelah and the Bee" (2006). She also appeared opposite Whoopi Goldberg in "How Stella Got Her Groove Back" (1998).

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Koreans Are Buying Condos in Koreatown: A Breeze of Good News for The Housing Market

Now that the Korean currency, the Won, is strong enough, the Korean government is giving Koreans a break by lifting a ban on how much they could invest abroad. Korean officials are trying to encourage more Koreans to invest overseas. The bulk of this investment will happen mostly in an area not far from Los Angeles. Condos are flying in Koreatown. Real estate agents and residential builders are getting ready to serve this niche market. The Shin Young Group, a major Korean giant, has started building condos with lots of Korean buyers waiting to buy them up. The Martin Group which is also building in downtown Los Angeles, has already sold some units to Korean buyers. Korean language papers, friends and word-of-mouth have sent the news. Many Koreans have family members here in the US. They have a relative in Koreatown where signs are in Korean. Very few signs are in English. Those who buy homes here are happy to invest in the country thanks to its long term stability and because of the education needs of their children.

In a time when the housing market, specially the residential housing development is suffering, this is truly some good news for the Los Angeles housing market.