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MADELEINE BRAND, host:

At the beginning of the month, October 1st, the federal government opened up its Hope for Homeowners program. The intent is to help people keep their homes and avoid foreclosure. But before you sign up for this Hope for Homeowners program, there are some costs to consider. And here to talk about the details is Michelle Singletary. She is our personal finance contributor. Welcome back, Michelle.

MICHELLE SINGLETARY: Oh, thank you.

BRAND: First, tell us what is the Hope for Homeowners program?

SINGLETARY: It was passed into law this summer to help homeowners keep their homes. We know that the foreclosure rates across the country are up, and so this is the government's effort to try to keep people in those homes.

The gist of this program is that lenders voluntarily allow borrowers to refinance under this program, and they have to reduce the mortgages to a maximum of 90 percent of the home's current appraised value. And they have to put people in 30-year fixed mortgages.

BRAND: So, this sounds like a good deal for homeowners, but you have some concerns. What are they?

SINGLETARY: Yeah. A lot of the news these days are about, you know, whether lenders will participate because it's a voluntary program. But homeowners ought to consider if this is worth it. For one thing, you are going to share any equity that you achieve in this home with the government. It's a five-year, sliding scale. The first year, the government gets 100 percent of that initial equity that's created, and then after that, you have to share any appreciated value in the home.

So let's say you live in the home, and the appraised value initially is $200,000. But several years later, it goes to 250. That $50,000 in value that was created over that time period, you have to split that 50-50 with the government. And here's the thing. You have to split this money no matter how long you own that home, even if you pay off that mortgage.

BRAND: I see. So, there is quite a hefty price to pay. What about some other costs?

SINGLETARY: Well, one of the other costs is that it includes a 3percent, up-front, mortgage-insurance premium. And then, after that, you have to pay a 1.5 percent annual, yearly premium based on the mortgage amount. Now, typically, FHA-backed loans carry about a half a percentage point annual premium. So this is a very costly loan, and obviously, the government feels as if they're taking the risk. There are some consumer groups that are very concerned about the equity split, particularly since it goes on forever.

BRAND: Still, Michelle, homeowners faced with foreclosure or this program, I mean, what's the better option?

SINGLETARY: If this is your last hope, and really, this is why it's called Hope for Homeowners. You know, hopefully, the lender will renegotiate terms in which you don't have to split your equity in the future. But if you are desperate to stay in this home, and there's nothing else that you can do, go for it, but recognize that you're going to be giving a lot up in the future. So, if you're desperate, and you want to stay in the home, and you fit the qualifications, then it could be a good program for you.

BRAND: Michelle Singletary writes the Color of Money column for The Washington Post. Michelle, thank you.

SINGLETARY: You're welcome.

BRAND: And Michelle does take your questions. If you have any for her, go to our website, npr.org/daytoday, click on contact us, and please put Michelle in the subject line.

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