The Housing and Economic Recovery Act of 2008

The federal Housing and Economic Recovery Act (HERA) created several programs designed to help homeowners facing foreclosure and encourage homeownership.

Hope for Homeowners Program
The goal of the Hope for Homeowners program is to refinance distressed homeowners into mortgages they can afford. Under the Program, a borrower facing difficulty paying his or her mortgage will be eligible to refinance into an affordable FHA-insured mortgage. The new mortgage balance will amount to 90% of the home’s current market value and must be a 30-year, fixed-rate loan. Participation is voluntary and restricted to FHA-approved lenders. (Non-approved lenders can modify mortgages, but they are not eligible for insurance.) Homeowners are required to share future home equity with FHA when they sell or refinance.

In order to be eligible for the Hope for Homeowners program, homeowners must:

• Not be able to afford their current mortgage.

• Use the home secured by the mortgage as their primary residence.

• Have obtained the mortgage on or before January 1, 2008.

• Have a monthly mortgage payment greater than 31% of their monthly income, as of March 1, 2008. Lenders must verify homeowners’ income with the IRS.

• Certify that they did not intentionally default on the exist mortgage or obtain it fraudulently, and they may not have been convicted of fraud in the past.

• The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.

• The loan amount may not exceed a maximum of $550,440

The Hope for Homeowners program is only in effect temporarily, with a start date of October 1, 2008 and an end date of September 30, 2011. If you are interested in and believe you qualify for the program, you should contact your lender to see if they would be willing to participate. If your lender does not participate then you may search for a local FHA lender that does through the website www.fha.gov. If you are ineligible for the refinance through this program there are other plans that you may be able to take advantage of with your lender through either a loan modification or a repayment plan. The only way to determine this is to ask.

First-Time Home Buyer Tax Credit
First-time buyers that purchase a home between April 8, 2008 and July 1, 2009 may be eligible for a tax credit of 10% of the purchase price of the home, up to $7,500. Tax credits reduce your tax liability dollar for dollar, so qualifying for one can save you a significant amount of cash. However, unlike most credits, this one has to be repaid, although the repayment terms are generous – payments are collected over a 15-year period, and no interest is charged. You can visit the IRS’s website, www.irs.gov, for more information about this tax credit.