FHA mortgage applications in February increased by 31% over January, with over 165,000 applications. Of the refinance applications, 79.7% were converted from conventional mortgages to FHA or participating in the Hope for Homeowners program. H4H may be getting more support from lenders as its potential for minimizing lender losses becomes more apparent.

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Amherst Securities Group researchers discovered in their research that programs that support short sales are best for minimizing losses, and they stated that the Hope-for-Homeowners (H4H) program is a "powerful alternative" to the Home Affordable Modification Program (HAMP). Because H4H provides the same lender relief as short sales, without the borrowing having to lose the home, it may be the best compromise available. The researchers concluded that sale or H4H provide a loss severity 15-20% less than that of a foreclosure sale.

Borrowers completing the H4H program have their balance lowered to 90% of the property value and refinance into a new FHA-insured mortgage.

Who Qualifies?

You should contact your lender to determine eligibility, but you may be eligible if:

  • The home is your primary residence, and you have no ownership interest in any other residential property, such as second homes.
  • Your existing mortgage was originated on or before January 1, 2008 and you have made at least six payments.
  • You are not able to pay your existing mortgage without help.
  • As of March 2008, your total monthly mortgage payments due were more than 31 percent of your gross monthly income.
  • You certify that you have not been convicted of fraud in the past 10 years, intentionally defaulted on debts; and did not knowingly or willingly provide material false information to obtain existing mortgage(s).

You will be required to share the equity you gain by participating in the program when you sell or refinance your home.
Here's an example of how the equity sharing works.

1. Let’s say your home has an appraised value at the time you receive your FHA mortgage of��������. $400,000.
2. And your mortgage is 90% of this, or����.... $360,000.
3. This means the initial equity is the difference between 1 and 2, or������������������������.. $40,000.

In this example, you and the FHA share this $40,000 when you sell your home or refinance your mortgage. Here’s how that $40,000 would be split:

If you sell or refinance:

During Year 1 FHA receives 100%, or $40,000 You receive 0%, or $0
During Year 2 FHA receives 90%, or $36,000 You receive 10%, or $4,000
During Year 3 FHA receives 80%, or $32,000 You receive 20%, or $8,000
During Year 4 FHA receives 70%, or $28,000 You receive 30%, or $12,000
During Year 5 FHA receives 60%, or $24,000 You receive 40%, or $16,000
After Year 5 FHA receives 50%, or $20,000 You receive 50%, or $20,000

In addition, any appreciation the property gains is split equally between you and FHA; this doesn't change no matter how many years go by after the H4H refinance.