FEATURE

H.R. (Chairman Frank)

S. (Chairman Dodd)

Summary

A voluntary program in which lenders may write down existing mortgages, issue new mortgages at up to 90% of appraised value. Participants receive benefit of the FHA insurance program.

Same. HUD to make determination that lenders are
"responsible and able to service mortgages responsibly."

FHA Insurance for Homeownership Retention

Secretary of HUD may make commitments to indemnify lenders by providing FHA insurance when borrower pays or prepays existing mortgage(s) and lender issues new mortgage

Secretary of HUD may make commitments to insure any eligible new (refinanced) mortgage. FHA to administer new "HOPE for Homeowners" program. Oversight: Board of Directors (Sec. HUD, Sec Treasury, Chairman of Federal Reserve System)

Eligible Category of Mortgages

Mortgages issued to individual borrowers and covering residences with 1-4 units.

No provision

Requirements for Program Participation - Prior (Existing) Mortgage Characteristics

Borrower/lender/mortgage must satisfy all requirements:

Principal residence of borrower secures mortgage
Borrower has not intentionally defaulted
Borrower?s existing payments on all mortgages for the property are more than 35 percent of income
Senior mortgage must have been originated prior to 12/31/07
All penalties for prepayment and all fees for default or delinquency to be waived for existing mortgage
All debt attributable to existing mortgage(s) to be extinguished
All encumbrances on property removed

Borrower/lender/mortgage must satisfy all requirements:

Principal residence of borrower secures mortgage
All penalties for prepayment or refinancing of existing mortgage waived
All fees for default or delinquency waived
All subordinate liens extinguished
All encumbrances on property removed
Borrower cannot "afford his or her mortgage payments"
Originated on or before January 1, 2008.

Requirements for Program Participation -- New Mortgage
(Not to exceed loan limits in effect at time of origination)

New mortgage must satisfy all requirements:

Principal residence of borrower
Fixed rate mortgage
Loan to value ratio not to exceed 90% of appraised value of property.
Refinanced mortgage must be sufficient to pay full amount of single insurance premium charged at settlement (may not exceed 5% of original insured principal of new mortgage). Designed to assure that borrower/owner has an equity position.
Debt service payments to be "meaningfully" reduced as compared to earlier senior debt servicing payments on prior mortgage

New mortgage must satisfy all requirements.

Fixed rate mortgage
Mortgage term no less than 30 years
Principal of mortgage determined by lesser of (1) Amount borrower can be reasonably expected to pay -- or -- (2) amount established at auction if mortgage is purchased at auction
Loan to value ratio not to exceed 90% of appraised value of property

Mandatory Exit Fee (Frank)

Government Share (Dodd)

Reflects amount government collects on subsequent sale or refinancing of property. Secured by subordinate lien in favor of HUD. Assures some pay-back for government assumption of risk on new mortgage. Intended as incentive to keep homeowner in property as means to neighborhood stability.

At time new mortgage is issued, government acquires a share of equity in the residence and also becomes entitled to a portion of subsequent appreciation.

Exit Fee: Amount
(Mandatory) (Frank)

Shared Equity and Appreciation (Dodd)

On subsequent sale or refinancing, government receives:

Percentage of net proceeds, based on period of ownership.

1-2 years: Government receives 90% of equity
2 -3 years: Government receives 80% of equity
3- 4 years: Government receives 70% of equity
4 -5 years: Government receives 60% of equity
5 years: Government receives 50% of equity

Appreciation: On issue of new mortgage, government entitled to receive 50% of appreciation on subsequent sale or refinancing. Determination of amount based on appraisal at time of sale.

Government share of equity of equity dependent on period of borrower?s use of residence. Government equity share based on sliding scale of years following issuance of new mortgage. (Borrower keeps balance of equity):
1 -2 years: Government receives 90% of equity
2 - 3 years: Government receives 80% of equity
3 -4 years: Government receives 70% of equity
4 - 5 years: Government receives 60% of equity
5 years: Government receives 50% of equity

Appreciation: On issue of new mortgage, government entitled to receive 50% of appreciation on subsequent sale or refinancing. Determination of amount based on appraisal at time of sale.

Underwriting Criteria

Standards must ensure that borrower has reasonable expectation of repaying mortgage. May consider:

Income, assets, liabilities of borrower
Payment history (but not based solely on current FICO score)
Cannot be denied on basis of any prior delinquency or default
Total debt to income ratio of up to 40% (50% in some circumstances)

No provision

FHA Loan Insurance Premiums

Single premium not to exceed 5% of amount of new mortgage at time of acquisition. Additional annual premiums not to exceed 1.5% of remaining insured balance.

Single premium not to exceed 3% of amount of new mortgage at time of acquisition. Additional annual premiums not to exceed 1% of remaining insured balance. Proceeds to be paid to HOPE Fund.

Origination Fees and Mortgage Rates

To be determined by HUD

To be determined by HUD

Aggregate Insurance Authority

(HOPE Fund - Dodd)

$300 Billion for mortgages, including authorization of additional personnel and contractors for setting underwriting and performing quality reviews

Create revolving fund: Home Ownership Preservation Entity Fund (HOPE Fund). Fund consists of proceeds from premiums, equity and appreciation shares and any appropriated amounts.
No specific appropriation amount specified

Monitoring of Underwriting Risk

HUD to monitor performance of designated underwriters to determine compliance with standards, rates of delinquency, claims rates and loss rates of underwriters. Failure of underwriter to perform may result in termination.

No provision, but HUD to approve servicers

Agency Reporting

Secretary of HUD report to Congress every six months. HUD Inspector General to report annually.

No provision

Guarantor

Government National Mortgage Association (GNMA) to create pools of mortgages to guarantee timely payment of principal and interest

GNMA to create pools of mortgages to guarantee timely payment of principal and interest.

Duration of Program

Two years from date of enactment. Secretary may extend in additional 6-month increments, not to exceed two years, as needed.

Program will be in effect until December 31, 2012.

Additional Appropriations

$200 million for counseling
$150 million for enhanced personnel and contractors

No specific provision, but authorization for enhanced personnel and contractors

Foreclosure Prevention Affordable Housing Goal

No provision

Sec. of HUD, in consultation with OFHEO and Sec. of Treasury, to establish goal for GSE purchase of "distressed mortgages."

Low- and Moderate-Income Housing Goal

No provision

Authority given to Sec HUD to temporarily suspend GSE low-and moderate-income housing goals. Suspension may be no longer than duration of HOPE program.

Additional Capital Requirements -- GSEs

No provision

OFHEO may modify GSE capital and reserve requirements to assure safety and soundness on GSE purchase of HOPE Fund mortgages (distressed mortgages).