The Federal Housing Administration's (FHA) nearly forgotten Hope for Homeowners program may get a jump-start now that Joel Harrison of Banker's Portfolio has lined up an investor willing to make a multibillion-dollar bet on underwater mortgages.
The H4H program turns conforming Fannie Mae and Freddie Mac loans that are "underwater" into new FHA-backed mortgages. Harrison said the investor — who he refused to identify — is willing to buy GNMA II H4H MBS. He hopes his Irvine, Calif., firm can deliver $25 billion to $50 billion in H4H loans before the congressionally approved refinancing program sunsets in September 2011. "We are really open to mortgage investors and asset managers contacting us," he said.
Harrison said he has arrangements with several originating servicers to refinance the loans. Under the program, underwater mortgages must be written down to a 96.5% loan-to-value ratio based on a current appraisal with any subordinated liens being extinguished. (The Department of Housing and Urban Development is authorized to pay incentives to second-lien holders for releasing their liens.)
Harrison started his shop two years ago and he believes mortgage holders are ready to accept such writedowns. "A H4H refinancing can be completed in 45 days with a 15% to 20% higher return than going through the foreclosure process, which can take 8 to 10 months," he said.