There was a pretty good article over at CNNmoney.com explaining why the new H4H program isn’t taking off. Here are some excerpts:
First, the program is voluntary for lenders. And it requires them to take a loss.
It allows certain borrowers at risk of foreclosure to refinance into a 30- year fixed-rate loan insured by the Federal Housing Administration (FHA) if the current lender agrees to write down the existing loan to 90% of the home’s market value today.
In plummeting areas such as California, if a lender holds a $500,000 mortgage and the home’s current appraisal comes in at $400,000, the lender would forgive $140,000 in all.
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That leads to the second problem: A lack of sheer manpower.
“I am just bombarded,” said Leeann Simpson, a senior loan officer at American Security Financial in Modesto, Calif, which is on the list. But so far, most of the lenders or servicers holding the existing loans aren’t ready for the program or do not understand it yet, she said.
The government did not release the final details of the program until launch day. “We were waiting and waiting for the guidelines, but we didn’t get them until Oct. 1,” said Simpson. “I literally stayed up all night reading, because I had a bunch of appointments lined up.”
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The third problem: Not everyone will qualify for the program.
“Our phones have been going crazy,” said Anthony Logan, president of Group Capital Mortgage in Cerritos, Calif, a participating lender. “Everyone just automatically thinks they are qualified [for the program] because their home is upside down and their payments just went up, and that is not necessarily the case.”
To qualify, borrowers must be at risk of foreclosure, their home needs to be their primary and only residence, and they have to document their income to show that their existing monthly mortgage payment tops 31% of their gross monthly income as of March 2008.
The government says it is too early to tell if the program is off to a rocky start.
