A portion of the initial equity created by the refinance is shared with HUD under the Hope for Homeowners (H4H) Program.
Initial equity is equal to the lesser of:
- the appraised value at the time of the H4H loan origination, less the original principal balance on the H4H Mortgage; or
- the outstanding amount due under all existing mortgages, less the original principal balance on the H4H Mortgage.
In the event of refinance, sale, or other disposition, HUD is entitled to receive the following percentage of initial equity:
• During Year 1 – 100 percent
• During Year 2 – 90 percent
• During Year 3 – 80 percent
• During Year 4 – 70 percent
• During Year 5 – 60 percent
• After Year 5 – 50 percent
Example: Appraised value is $200,000, less the original principal balance on the H4H mortgage. The loan-to- value on the H4H mortgage is 90 percent, or $180,000. The equity amount that would be stated in the Exit Premium Mortgages (EPM) is $20,000. If the borrower refinanced during Year 2, $18,000 in initial equity is paid to HUD.
Mortgagees should contact HUD’s Loan Servicing Contractor for questions related to servicing or satisfaction of H4H EPM.
HUD’s Loan Servicing Contractor:
Novad Management Consulting
2401 NW 23rd Street, Suite 1A1
Oklahoma City, OK 73107
Toll-Free Number: (800) CALLFHA (225-5342)
Fax Number: (800) 489-1733
- Borrower Inquiries: firstname.lastname@example.org
- Payoff Requests: email@example.com
For policy information see Handbook 4000.1 III.A.3.h. at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh