Overview of The Complete HOPE Regulation :: 24 CFR 4001

Here are the Highlights of the Regulation:

1) The HOPE for Homeowners Program is a temporary program authorized
by section 257 of the National Housing Act, established within the
Federal Housing Administration (FHA) of the Department of Housing and
Urban Development (HUD) ...

2) Under this Program, an eligible mortgagor may obtain a
refinancing of his or her existing mortgage(s) with a new mortgage loan
insured by FHA, subject to conditions and restrictions specified in
section 257 of the National Housing Act and requirements established by
the Board. ...

3) A mortgage eligible to be refinanced under section 257 of the Act
must:(a) Have been originated on or before January 1, 2008;(b) Be secured by a property owned and occupied by the mortgagor as his or her primary residence, and be the only residence in which the mortgagor has any present ownership interest; and ...

4) In order for a mortgagor to be eligible to refinance his or her
existing mortgages under section 257 of the Act, the mortgagor must:
(a) Have had, on March 1, 2008, a monthly total mortgage payment of
more than 31 percent of the mortgagor's monthly gross income; (b) Not
have an ownership interest in any other residential property; (c) Not
have been convicted of fraud under federal or state law in the past 10
years; (d) Certify that the mortgagor has not intentionally defaulted
on any mortgage or debt and has not knowingly, or willfully and with
actual knowledge, furnished material information know to be false for
purposes of obtaining any Program mortgage; and (e) Meet such other
requirements as the Board may adopt. ...

5) Debt-to-income. The sum of the total monthly mortgage payment
under the Program mortgage and all monthly recurring expenses of the
mortgagor does not exceed 43 percent of the mortgagor's monthly gross
income. (b) Past credit performance. The mortgagor must have made at
least six full payments on the existing senior mortgage being
refinanced under the Program. ...

6) FHA's interest. Upon the sale or disposition of a property or
Program mortgage refinancing, FHA shall calculate and be entitled to
receive the portion of the initial equity
>135% 9% Cumulative CLTV <>135%................................... 9%
Cumulative CLTV

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CHAPTER XXIV--BOARD OF DIRECTORS OF THE HOPE FOR HOMEOWNERS PROGRAMPART 4001--HOPE FOR HOMEOWNERS PROGRAMSubpart A--HOPE for Homeowners Program--General RequirementsSec4001.01 Purpose of program.4001.03 Requirements and delegated authority.4001.05 Approval of mortgagees.4001.07 Definitions.[[Page 58421]]Subpart B--Eligibility Requirements and Underwriting Procedures4001.102 Cross-reference.4001.104 Eligible mortgages.4001.106 Eligible mortgagors.4001.108 Eligible properties.4001.110 Underwriting.4001.112 Income verification.4001.114 Appraisal.4001.116 Representations and prohibitions.4001.118 Equity sharing.4001.120 Appreciation sharing.4001.122 Fees and closing costs.Subpart C--Rights and Obligations under the Contract of Insurance4001.201 Cross-reference.4001.203 Calculation of upfront and annual mortgage insurance premiums for Program mortgages.Subpart D--Servicing responsibilities4001.301 Cross-reference.4001.303 Prohibition on subordinate liens during first five years.Subpart E--EnforcementMortgagor False Information4001.401 Notice of false information from mortgagor-procedure.Appraiser Independence4001.403 Prohibitions on interested parties in insured mortgage transaction.Mortgagees4001.405 Mortgagees.Appendix A to Part 4001--Calculation of Future Appreciation Payment. Authority: 12 U.S.C. 1701z-22.Subpart A--HOPE for Homeowners Program--General RequirementsSec. 4001.01 Purpose of program. The HOPE for Homeowners Program is a temporary program authorized by section 257 of the National Housing Act, established within the Federal Housing Administration (FHA) of the Department of Housing and Urban Development (HUD) that offers homeowners and existing loan holders (or servicers acting on their behalf) FHA insurance on refinanced loans for distressed borrowers to support long-term sustainable homeownership by, among other things, allowing homeowners to avoid foreclosure. The HOPE for Homeowners Program is administered by HUD through FHA.Sec. 4001.03 Requirements and delegated authority. (a) Core requirements. This subpart establishes the core requirements for the HOPE for Homeowners Program that have been adopted by the Board of Directors (Board) for the HOPE for Homeowners Program (Program). In addition to the core requirements, codified in this subpart, the Board of Directors may adopt and issue additional requirements, standards and policies through non-codified regulations, including through order, Federal Register notice, or other statement, such as a mortgagee letter, to be issued and implemented by FHA. (b) Basic Program parameters. (1) FHA is authorized to insure eligible refinanced mortgages under the Program commencing no earlier than October 1, 2008. The authority to insure additional mortgages under the Program expires September 30, 2011. (2) Under this Program, an eligible mortgagor may obtain a refinancing of his or her existing mortgage(s) with a new mortgage loan insured by FHA, subject to conditions and restrictions specified in section 257 of the National Housing Act and requirements established by the Board. (c) Delegated authority. HUD is statutorily charged with administering, through FHA, the Program. In carrying out the Program requirements established by the Board, FHA is directed to issue such interim guidance and mortgagee letters as FHA determines necessary or appropriate, within the parameters of the requirements, standards and policies adopted by the Board. In addition to FHA's statutory charge, the Board of Directors authorizes FHA to address unique or case-by-case situations as may be encountered by FHA in carrying out the Program, and to take such action as may be necessary to implement the Board's requirements. This delegated implementing authority includes, but is not limited to, specifying application forms, mortgage application procedures, certifications or other assurances, and other information collection requirements, subject to such rules, standards and policies as the Board may adopt. (d) Other applicable requirements. Except as may be otherwise provided by the Board, the provisions and requirements in the FHA regulations in 24 CFR part 203, which are generally applicable to all FHA-insured single family mortgage insurance programs, also apply with respect to the insurance of a refinanced eligible mortgage under the Program.Sec. 4001.05 Approval of mortgagees. (a) Eligibility. In order for a mortgage to be eligible for insurance under this part, the mortgagee originating the mortgage loan and seeking mortgage insurance under this part shall have been approved by the Secretary pursuant to 24 CFR part 202. (b) Mortgagee whose loan is to be refinanced. A mortgagee holding or servicing an eligible mortgage to be refinanced and insured under section 257 of the National Housing Act is not required to be an approved mortgagee as required in paragraph (a) of this section, unless it seeks to be the originator of the refinanced mortgage to be insured by FHA.Sec. 4001.07 Definitions. As used in this part and in the Program, the following definitions apply. Act means the National Housing Act (12 U.S.C. 1701 et seq. ). Allowable closing costs mean charges, fees and discounts that the mortgagee may collect from the mortgagor as provided in 24 CFR 203.27(a). Board means the Board of Directors for the HOPE for Homeowners Program, which is comprised of the Secretary of HUD, the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System (Federal Reserve Board), and the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation or the designees of each such individual. Capital improvements means a repair, renovation, or addition to a property that significantly enhances the value of the property, but does not include expenses for interior decor, landscape maintenance, or normal maintenance or replacement expenses. Contract of insurance means the agreement by which FHA provides mortgage insurance to a mortgagee. Default and delinquency fees means late charges contained in a mortgage/security instrument for the late or non-receipt of payments from mortgagors after the date upon which payment is due, including charges imposed by the mortgagee for the return of payments on the mortgage due to non-sufficient funds. Direct financial benefit, as used in section 257(e)(1)(A)(ii)(II) of the Act, consists of the greater of two factors: (1) The amount of initial equity the mortgagor has in the property at the closing for the Program mortgage as determined under Sec. 4001.118; and (2) The total amount that the existing senior mortgage and all existing subordinate mortgages on the property have been written down. Disposition means any transaction that results in whole or partial transfer of title of a property other than-- (1) A sale of the property; or (2) Any transaction or transfer specified in 12 U.S.C. Sec. 1701j-3(d)(1) through (8). Eligible Mortgage means a mortgage as defined in Sec. 4001.104. Existing senior mortgage means an eligible mortgage that has superior[[Page 58422]]priority and is being refinanced by a mortgage insured under section 257 of the Act. Existing subordinate mortgage means a mortgage that is subordinate in priority to an eligible mortgage which is being refinanced by a mortgage insured under section 257 of the Act. FHA means the Federal Housing Administration. HOPE for Homeowners Program (or Program) means the program established under section 257 of the Act. HUD means the Department of Housing and Urban Development. Intentionally defaulted for purposes of section 257(e)(1)(A) of the Act means the mortgagor: (1) Knowingly failed to make payment on the mortgage or debt; (2) Had available funds at the time payment on the mortgage or debt was due that could pay the mortgage or debt without undue hardship; and (3) The debt was not subject to a bona fide dispute. Mortgage has the same meaning as provided in 24 CFR 203.17(a)(1). Mortgagee has the same meaning as provided in 24 CFR 203.251(f). Mortgagor has the same meaning as provided in 24 CFR 203.251(e). Premium pricing means the price for the sale of a mortgage loan with an above market rate of interest. Prepayment penalties mean such amounts as defined in 12 CFR 226.32(d)(6) of the Federal Reserve Board's Regulation Z (Truth in Lending). Primary residence means the dwelling where the mortgagor maintains his or her permanent place of abode and typically spends the majority of the calendar year. A mortgagor can only have one primary residence. Program mortgage means the mortgage into which the existing senior mortgage is refinanced. Secretary means the Secretary of Housing and Urban Development. Total monthly mortgage payment means the sum of: (1) Principal and interest, as determined on a fully indexed and fully amortized basis; and (2) Escrowed amounts. (i) The monthly required amount collected by or on behalf of the mortgagee for real estate taxes, premiums for required hazard and mortgage insurance, homeowners' association dues, ground rent, special assessments, water and sewer charges and other similar charges required by the note or security instrument; or (ii) For mortgages not subject to escrow deposits, \1/12\ of the estimated annual costs for items listed in paragraph (2)(i) of this definition.Subpart B--Eligibility Requirements and Underwriting ProceduresSec. 4001.102 Cross-reference. (a) All of the provisions of 24 CFR part 203, subpart A, concerning eligibility requirements of mortgages covering one-family dwellings under section 203 of the National Housing Act (12 U.S.C. 1709) apply to mortgages on one-family dwellings to be insured under section 257 of the National Housing Act (12 U.S.C. 1701z-22), except the following provisions: 203.7 Commitment Process; 203.10 Informed consumer choice for prospective FHA mortgagors; 203.12 Mortgage insurance on proposed or new subdivisions; 203.14 Builder's warranty; 203.16 Certificate and contract regarding use of dwelling for transient or hotel purposes; 203.18 Maximum mortgage amounts; 203.18a Solar-energy system; 203.18b Increased mortgage amount; 203.18c One-time or up-front MIP excluded from limitations on maximum mortgage amounts; 203.18d Minimum principal loan amount; 203.19 Mortgagor's minimum investment; 203.20 Agreed interest rate; 203.29 Eligible mortgage in Alaska, Guam, Hawaii or the Virgin Islands; 203.32 Mortgage lien; 203.37a Sale of property; 203.42 Rental properties; 203.43 Eligibility of miscellaneous types of mortgages; 203.43a Eligibility of mortgages covering housing in certain neighborhoods; 203.43d Eligibility of mortgages in certain communities; 203.43e Eligibility of mortgages covering houses in federally impacted areas; 203.43g Eligibility of mortgages in certain communities; 203.43h Eligibility of mortgages on Indian land insured pursuant to section 248 of the National Housing Act; 203.43i Eligibility of mortgages on Hawaiian Home Lands insured pursuant to section 247 of the National Housing Act; 203.43j Eligibility of mortgages on Allegany Reservation of Seneca Nation Indians; 203.44 Eligibility of advances; 203.45 Eligibility of graduated payment mortgages; 203.47 Eligibility of growing equity mortgages; 203.49 Eligibility of adjustable rate mortgages; 203.50 Eligibility of rehabilitation loans; 203.51 Applicability; and 203.200-203.209 Insured Ten-Year Protection Plans (Plan). (b) For the purposes of this subpart, all references in 24 CFR part 203, subpart A, to section 203 of the Act shall be construed to refer to section 257 of the Act. Any references in 24 CFR part 203, subpart A, to the ``Mutual Mortgage Insurance Fund'' shall be deemed to be to the Home Ownership Preservation Entity Fund, and any references to ``the Commissioner'' shall be deemed to be to the Board or the Commissioner (as the context may require). (c) If there is any conflict in the application of any requirement of 24 CFR part 203, subpart A, to this part the provisions of this part shall control.Sec. 4001.104 Eligible mortgages. A mortgage eligible to be refinanced under section 257 of the Act must: (a) Have been originated on or before January 1, 2008; (b) Be secured by a property owned and occupied by the mortgagor as his or her primary residence, and be the only residence in which the mortgagor has any present ownership interest; and (c) Meet such other requirements as the Board may adopt.Sec. 4001.106 Eligible mortgagors. In order for a mortgagor to be eligible to refinance his or her existing mortgages under section 257 of the Act, the mortgagor must: (a) Have had, on March 1, 2008, a monthly total mortgage payment of more than 31 percent of the mortgagor's monthly gross income; (b) Not have an ownership interest in any other residential property; (c) Not have been convicted of fraud under federal or state law in the past 10 years; (d) Certify that the mortgagor has not intentionally defaulted on any mortgage or debt and has not knowingly, or willfully and with actual knowledge, furnished material information know to be false for purposes of obtaining any Program mortgage; and (e) Meet such other requirements as the Board may adopt. Sec. 4001.108 Eligible properties. (a) A mortgage may be insured under the Program only if the property that is to be the security for the mortgage is a one-family residence. (b) The following property types are eligible to secure a mortgage insured under the Program: (1) Detached and semi-detached dwellings; (2) A condominium unit; (3) A cooperative unit; or (4) A manufactured home that is permanently affixed to realty and is treated as realty under applicable state law except state taxation law. Sec. 4001.110 Underwriting. A mortgage may be insured under the Program only if the following conditions are met: [[Page 58423]] (a) Debt-to-income thresholds. Except as provided in paragraph (c) of this section: (1) Payment-to-income. The total monthly mortgage payment of the mortgagor under the Program mortgage does not exceed 31 percent of the mortgagor's monthly gross income; and (2) Debt-to-income. The sum of the total monthly mortgage payment under the Program mortgage and all monthly recurring expenses of the mortgagor does not exceed 43 percent of the mortgagor's monthly gross income. (b) Past credit performance. The mortgagor must have made at least six full payments on the existing senior mortgage being refinanced under the Program. (c) Trial modifications. For any mortgagor who is unable to meet the requirements of paragraph (a) of this section, a mortgage loan may nevertheless be presented for insurance by FHA under the Program if: (1) The mortgagor, using existing income, has made full and timely mortgage payments on the existing senior mortgage pursuant to the terms of the trial modification: (i) For the three consecutive months before submission of the application for the mortgage to be insured under the Program; and (ii) In an amount that is at least 90 percent of the estimated total monthly mortgage payment to be paid by the mortgagor on the Program mortgage. (2) The total monthly mortgage payment of the mortgagor under the Program mortgage does not exceed 38 percent of the mortgagor's monthly income; and (3) The sum of the total monthly mortgage payment under the Program mortgage and all monthly recurring expenses of the mortgagor does not exceed 50 percent of the mortgagor's monthly gross income. (d) Non-occupant co-borrowers. A mortgage loan may be insured by the FHA under the Program, even if one of the mortgagors on the loan (i.e. , a co-signer) does not reside at the residence securing the loan, provided that the non-resident mortgagor relinquishes all interests in the property that is to be security for the mortgage before an application is submitted for FHA insurance under the Program. (e) Amount of new mortgage payment. The mortgagor's total monthly payment on the mortgage to be insured under the Program must not be greater than the mortgagor's aggregate total monthly mortgage payment under the mortgagor's existing senior mortgage and all existing subordinate mortgages. (f) Limit on origination fees. Mortgagees may charge and collect from mortgagors allowable closing costs.Sec. 4001.112 Income verification. The mortgagee shall use FHA's procedures to verify the mortgagor's income and shall comply with the following additional requirements: (a) The mortgagee shall document and verify the income of the mortgagor by obtaining a transcript of the borrower's Federal income tax returns or a copy of the borrower's Federal income tax returns obtained directly from the Internal Revenue Service for the most recent two years; and (b) The mortgagee shall document and verify the mortgagor's income in any case in which the mortgagor has not filed a Federal income tax return. Sec. 4001.114 Appraisal. (a) The property shall be appraised by an appraiser on the FHA Appraiser Roster. (b) An appraisal of a property to be security for a Program mortgage shall be conducted in accordance with Uniform Standards of Professional Appraisal Practice (USPAP) but dated no more than 90 days from the date on which the mortgage transaction is closed, except as otherwise provided by the Board. (c) The mortgagee must inform the appraiser that copies of the appraisal may be shared with holders and servicers of existing subordinate mortgages. Sec. 4001.116 Representations and prohibitions. (a) Underwriting and appraisal standards. In order for the Program mortgage to be eligible for insurance under the Program, the underwriter and the mortgagee must provide certifications, in a format approved by the FHA, that the mortgage is in compliance with the underwriting and the appraisal standards set forth in this part, and that it meets all requirements applicable to the Program. FHA may require additional certifications by the mortgagee to ensure compliance with such additional standards as the FHA deems necessary given the specific mortgage transaction presented. (b) Mortgagor's liability for repayment. (1) The mortgagor shall provide a certification to FHA that the mortgagor has not: (i) Intentionally defaulted on the mortgagor's existing mortgage(s), or any other debt; or (ii) Knowingly or willfully and with actual knowledge furnished material information known to be false for the purpose of obtaining the mortgagor's existing mortgage(s). (2) The mortgagor shall provide any other certifications that FHA may otherwise require. (3) A mortgagor obligated under a Program mortgage shall agree in writing, on a form approved by the Board, to be liable to pay to FHA any Direct Financial Benefit achieved from the reduction of indebtedness on the existing senior and subordinate mortgages that are being refinanced under the Program if he or she makes a false statement or other misrepresentation in the certifications and documentation required for Program eligibility, including but not limited to the certifications required under section 257(e)(1)(A)(i) of the Act. (c) Mortgagee in violation of Program requirements. (1) If the mortgagee holds a Program mortgage that it originated and/or underwrote, and FHA finds that the mortgagee violated the Program requirements, FHA is prohibited from paying FHA insurance benefits to that mortgagee. (2) If the mortgagee no longer holds the Program mortgage that it originated and/or underwrote, FHA will pay the insurance claim to the mortgagee presently holding the Program mortgage (if all other requirements of the contract for mortgage insurance are met and the present holder did not participate in the violation of Program requirements) and shall seek indemnification from the non-holding mortgagee. (d) FHA insurance. A mortgage is eligible for insurance if the mortgagee submits a complete case binder within 120 days from the date of closing of the mortgage, or such other time as the Board may prescribe. The binder shall include evidence acceptable to the Board that the mortgage is current. (e) Mortgagor failure to make first mortgage payment. FHA shall not pay a mortgage insurance claim to any mortgagee if the first total monthly mortgage payment is not made within the time frame established in paragraph (d) of this section. The mortgagee shall not, directly or indirectly, make all or a part of the first total monthly mortgage payment on behalf of the mortgagor. The mortgagee is prohibited from escrowing funds at closing for all or part of the first total monthly mortgage payment.Sec. 4001.118 Equity sharing. (a) Initial Equity. For purposes of section 257(k)(1) of the Act, the initial equity created as a direct result of the origination of a Program mortgage on a property, as calculated by the Program mortgage lender, shall equal: (1) The appraised value of the property that was used at the time of origination of the Program mortgage to[[Page 58424]]underwrite the mortgage and to determine compliance with the maximum loan-to-value ratio at origination established by section 257(e)(2)(B) of the Act; less (2) The original principal amount of the Program mortgage on the property. (b) FHA's interest. Upon the sale or disposition of a property or Program mortgage refinancing, FHA shall calculate and be entitled to receive the portion of the initial equity (as defined by paragraph (a) of this section) set forth in section 257(k)(1) of the Act, subject to such standards and policies as the Board may establish. Sec. 4001.120 Appreciation sharing. (a) Calculation of appreciation. For purposes of section 257(k)(2) of the Act, the amount of the appreciation in value of a property securing a Program mortgage that occurs between the date the mortgage was insured under section 257 of the Act and the date of any subsequent sale or disposition of the property shall be equal to the following, as such a>135%................................... 9%Cumulative CLTV < 135%.................................. 12% ------------------------------------------------------------------------ Note: Appreciation payment to a subordinate lien holder will depend on actual appreciation at the time of sale of the property and will be limited by the amount of future appreciation HUD receives. Payment will be made according to the subordinate lien holder's position of priority in relation to the property at the time the H4H mortgage is originated, and will be based upon principal and interest on the date of origination of the Program mortgage, calculated at the pre-default contract rate of interest. Dated at Washington, DC, this 30th day of September, 2008. By order of the Board of Directors of the HOPE for Homeowners Program.Margaret E. Burns,Executive Director of the Board. [FR Doc. E8-23612 Filed 10-3-08; 8:45 am]BILLING CODE 4210-AA-P

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Hugh Wood, Esq.
Wood & Meredith, LLP
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Phone: 404-633-4100
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