An ill-fated $300 billion program Congress approved in 2008 to refinance delinquent underwater borrowers into Federal Housing Administration (FHA) loans will expire Sept. 30 – after providing relief to less than 600 borrowers.
FHA recently put out a notice telling lenders that they must obtain a case number by July 27 if they want to a get their last “Hope for Homeowners” loan insured.
“It was much less successful that it should have been,” said Joel Harrison, director of business development at Bankers Portfolio, which has lined up investors to purchase H4H loans.
Unfortunately, Congress was trying to make a “moral decision” on who should be eligible for principal reduction and placed too many restrictions on the H4H program. “This decision should have been left to the mortgage holder/investors,” he said.
The H4H program was designed to help struggling homeowners with conventional subprime and nontraditional loans refinance into new 30-year fixed rate FHA loans with a 96.75% loan-to-value ratio. Investors had to write down at least 10% of the principal amount of the existing mortgage.
“It turned out to be a better performing loan than was anticipated,” Harrison said. Bankers Portfolio is based in Irvine, Calif.
Since the launch of the principal reduction program, FHA has endorsed 418 H4H loans. Another 155 H4H loan applications were pending at FHA for endorsement as of April 30.