The previous version of this program requested that banks opt to reduce current mortgage balance to that of ninety percent of a home's current market value. The loan would in turn be refinanced into a FHA mortgage.
Tom Kelly, a spokesperson for JP Morgan Chase stated that that version of the program did not work because it forced lending institutions to sell mortgages short, with very little to no chance of an upside.
The current version of Hope entices lenders to participate by offering them one thousand dollars for each Hope-refinanced loan and in turn easing the amount that they would be required to write off as a loss by enabling them to offer loans up to 93% of a home's current market value.
The most significant change to the plan is that it enables The United States Department of Housing and Urban Development (HUD), which is the parent agency to FHA, the ability to share home price appreciation with investors. Amounts up to appraised value of the property when the existing loan was first issued will be allowed.
The bill in its original form included cramdown legislation which would have given bankruptcy judges the power to modify the terms of the first mortgage. That portion of the bill was voted down by the Senate.
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