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Hope-less?

Looks like FHA’s Hope for Homeowners is going over like a lead balloon.  According to CNNMoney, most lenders are rejecting the voluntary programs in favor of their own. The FHA programs requires that the lender write down the balance of the loan to 5% less than the value of the home and in addition pay FHA its fees to originate the new loan. So FHA gets a new loan that is a realistic LTV and at this point unlikely to have much of a downside, while the original lender takes the loss.

Not surprisingly, lenders prefer to take their chances with their own solutions, for example, instituting repayment plans alllowing borrowers to catch up their arreages over time and leaving the loans on the books at full value. Or modifying the terms of the loans to make payments affordable. Principal writedowns force the lender to give up any chance to make up the values when housing prices recover–they are considered too drastic and permanent a solution in most cases.

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