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The Housing and Economic Recovery Act of 2008 was signed into law with an effective date of October 1, 2008. It includes updated FHA Refinance Loan Guidelines as part of its mandate. Those of you who are facing eminent risk of mortgage loan foreclosure can be helped by this new program aptly named “HOPE for Homeowners Act of 2008″.

You can be eligible to borrow funds under this program if you are not able to afford your current monthly mortgage payments and you live full time in your home. The law has strict rules against lending to property investors. To qualify for the program, you need to verify that you have not defaulted on your mortgage loan intentionally. You must also verify that your debt-to-income ratio exceeds 31% by date certain March 1, 2008. Your lender will need to verify your income directly with the IRS.

This new law essentially provides you with an FHA backed insured mortgage at 90% of your loan value. This can create a financial windfall to many borrowers whose property, though severely depressed at the moment, will eventually rise in value as the economy strengthens. To avoid having this financial windfall benefit only you, the property owner, you must agree to share your newfound equity and future mortgage appreciation value with the FHA. This will allow the FHA to recover some of the monies lent and allow you to keep your home at the same time.

When you sign up for this program you will be required to share equity and appreciation in your property until you either sell your home or refinance the FHA insured mortgage. Also, as the mortgage holder, you will only have access to the newfound equity over a 5-year phase in time period. The payback schedule of shared equity and appreciation with the FHA upon selling your property or refinancing is as follows: 1) 100% for the first year, 2) 90% for the second year, 3) 80% for the third year, 4) 70% for the fourth year and 5) 50% for the fifth year. Also, when you sell or refinance your home again the FHA mandates you pay a 3% Exit fee on the principle mortgage balance.

Check Back For Part Two

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