Remember the October bailout "Hope for Homeowners". This is the one the offered FHA backed loans to struggling homeowners. The banks were to write down the principal balance to 90% of current value and the FHA would then insure the loan. When the borrowers sold the FHA was to get 50% of the profit. It was hyped that this would help 400,000 people stay in their homes.
Now for the reality part
by Diana Olick
I’ve just seen the latest numbers on the recently launched government Hope for Homeowners program, and I’d call them laughable if the whole thing weren’t so blatantly sad.
Hope for Homeowners was launched Oct. 1 as part of the Housing and Economic Recovery Act signed into law on July 30,2008. Proponents used a Congressional Budget Office estimate of 400,000 homeowners that could be helped over three years. The latest projection was that 19,000 applications would be received in the first year.
The program works like this. A borrower in trouble contacts the lender, and the lender agrees to write down the principal to 90 percent of the current value of the property. They then get a new FHA insured loan. In return, when the borrower eventually sells the house, the government gets half the equity that is created after the new loan begins: in other words any appreciation. FHA will insure up to $300 billion in new loans.
Well I doubt we’re all going to have to worry about that $300 billion. Here’s the reality: In the last two weeks, FHA received exactly 69 applications to the H4H program. Since the start of the program, a little over a month ago, it has received 111. Now I’m no mathematician, but that doesn’t exactly extrapolate out to 400,000 over three years or even 19,000 over one year or even over a few months. In fact, HUD took the projections out of the release.