HOPE For Homeowners

HOPE for Homeowners was a federal aid program designed to help homeowners in financial distress due to the collapse of the subprime mortgage market in 2008. Backed by the Federal Housing Administration (FHA), the HOPE for Homeowners Act was one of the steps the federal government took to help stabilize the housing market and protect qualified homeowners from loan default and foreclosure. The program was active between October 1, 2008, and September 30.

The HOPE for Homeowners program was part of the Emergency Economic Stabilization Act of 2008, which became law as the subprime mortgage crisis peaked in October of that year. Part of the law required the government to provide federal loan guarantees and credit enhancements for homeowners in financial distress. The program aimed to allow homeowners to refinance into affordable, fixed-rate mortgages.

To be eligible for the program, the original mortgage had to be dated on or before January 1, 2008; the homeowner could not have defaulted on the original loan intentionally; the homeowner could not be invested in multiple home loans; all information on the original mortgage was true and verified, including income sources and job details; and the homeowner could not have been convicted of fraud.

Homeowners also had to agree to an equity-sharing program. In this case, equity was the difference between the amount of the original loan and the actual value of the home. If the home was sold or refinanced after the homeowner accepted assistance from the HOPE for Homeowners program, any equity gained had to be shared with the Federal Housing Administration. How much the government received was contingent on how long the homeowner waited to sell or refinance. 

If a sale occurred in the first year of participation in HOPE for Homeowners, the government received 100% of the equity. Thereafter it was a sliding scale; for example, in Year 2, homeowners kept 10 percent of the equity and the FHA got 90 percent, in Year 3 the split was 20 percent and 80 percent for the FHA, and so on. After Year 5, the split was 50/50.

As part of the HOPE for Homeowners program, participants received a 30-year fixed-rate mortgage. In some cases, that 30-year loan was eligible for extension. Extending to 40 years was helpful when the homeowner had to carry a particularly large amount of debt, which was an issue for many homeowners; the 40-year option allowed for a lower monthly mortgage payment.