The Impact of the HOPE for Homeowners Program Rule

Alastair McFarlane
Edward Szymanoski
Kurt Usowski

Impact

A regulatory impact analysis must accompany every economically significant federal rule or regulation. The Office of Policy Development and Research performs this analysis for all U.S. Department of Housing and Urban Development rules. An impact analysis is a forecast of the annual benefits and costs accruing to all parties, including the taxpayers, from a given regulation. Modeling these benefits and costs involves use of past research findings, application of economic principles, empirical investigation, and professional judgment.

This article reflects the views of the authors and does not necessarily reflect the views of the U.S. Department of Housing and Urban Development.

The HOPE for Homeowners program allows homeowners to avoid foreclosure, using the Federal Housing Administration (FHA) insurance program structure already in place. Certain borrowers facing difficulties with their mortgages are eligible to refinance into FHA-insured mortgages. The benefit of the program is the prevention of foreclosures, which have associated economic costs on the foreclosed-on household, lenders, neighboring properties, and the local government. The cost of the HOPE for Homeowners program to the taxpayer is the subsidy paid to the FHA to cover the cost of the credit guarantee not covered by program revenues. We estimate the expected net benefit of the program to range from $6,200 to $35,500 per refinancing. Thus, with only 10,000 participants annually, the program will generate $62 million to $355 million of net benefits to society. Program participation could be as high as 100,000 annually, however, with commensurately higher benefits.