HOPE Failure
Since the HOPE for Homeowners plan was adopted, the Federal Housing Authority has revealed that they received 752 applications, but only insured one loan that has helped save a homeowner from foreclosure. The plan appears to be a failure even though Congress made $300 billion available to back the loans.  However, the new Homeowner Affordability and Stabilization Plan is expected to work much better.

The original HOPE plan had asked lenders to voluntarily refinance delinquent borrowers’ mortgages by reducing their principal balance on loans to 90% of a home’s current market value. The plan was supposed to then have the new 30-year fixed-rate loans backed by FHA. Under the new Affordability and Stabilization Plan, lenders would only have to write down to 93%.

The key reason why lenders refused to use the plan is that they don’t favor writing down mortgage balances.  Instead they would rather lower interest rates and extend loan terms. However, this strategy did not work because 50% of the mortgages that were modified the last six months, the borrowers have defaulted again.  Under the old plan, borrowers would have had to agree to pay back the government 50% of any future profits received on the home as well.

Hope for the New Plan
Under the new plan, borrowers do not have to pay back any profits if they remain in the home for 36 months.   Also, there are incentive payments to loan servicers in the sum of $1,000 for participating in the plan.  The new plan is more favorable to both homeowners and servicers because it not only reduces mortgage payments by lowering interest rates and/or extending terms, it also provides for lowering the mortgage balance. It is hoped that it will do much more good than the old HOPE plan.  One key element of the new plan is that borrowers are only allowed to modify their mortgage one time.

So if you do not have sufficient income to pay the new monthly mortgage payment, you will not qualify for the new plan, and need to find other options to save your home from foreclosure.

Other Options Available
Such options may include a deed in lieu of foreclosure, short sale, selling the home if there is equity, refinancing, and as last resorts letting the home go to foreclosure or filing bankruptcy.  It is recommended that you work with a mortgage modification company or an attorney who can assist you in choosing the best option for you.

As always, thanks for reading this post and if you enjoyed it be sure to comment below. Also, check out our FREE 2009 Loan Modification Guide: Saving Your Home From Foreclosure.