Hope for homeowners. How much TBD

Today the Department of Housing and Urban Development (HUD) released lender guidelines for the new Hope for Homeowners program that was included in the housing bailout bill Congress passed in July.

If you're struggling with mortgage payments, it's definitely something you should ask your servicer—or a housing counselor—about. The goal of the program is to refinance people into more affordable loans that are insured by the Federal Housing Administration (the FHA is part of HUD). The difference between Hope for Homeowners and other government-backed refinance programs, like FHASecure, is that Hope for Homeowners seeks to convince lenders to write down the amount of principal they're owed on mortgages. This is probably one of the best solutions for a struggling homeowner, especially if the value of the house has dropped. But it's one of the last things lenders like to do.

So the question is, Will lenders play ball?

The guidelines on how, exactly, the program works just went up today, so it's too early to give a list of participants, though HUD has been having conversations with at least some lenders who want to opt in. The tricky part will come in negotiating with anyone who is owed money through a second mortgage or other lien—they will likely get wiped out. To sweeten the deal, the program promises that such lenders will later share in any proceeds garnered when the house is sold. In exchange for the risk the FHA is taking on in guaranteeing your new loan, you agree to give them part of any profit you make later on when you go to sell your house.

That seems logistically difficult. Not to mention troublesome down the road. I can already see some guy shocked that he owes the government money when he goes to move 20 years from now. One of the lessons we've learned of late is that people tend not to pay too much attention to all those papers they sign at closing.

But I don't want to poo-poo Hope for Homeowners before it even gets out of the gate. Right now a whole lot of people are asking why the government isn't helping ordinary homeowners. Well, the government is trying. If you think you might need that help, start by reading this and this.

I know this is a really public-service-style blog post, but, you know, these are people lives we're talking about.

Barbara!