The Hope for Homeowners program (H4H) was the federal government’s attempt to quell the rising number of home foreclosures.

It was launched on Oct. 1 and, over the next three years, was expected to help as many as 400,000 homeowners.

The program is designed to allow homeowners who are late on their payments to refinance their mortgage into a more affordable structure.

The loans would be insured by the Federal Housing Administration (FHA).

The goal is to reduce the loan balance (and sometimes the interest rate) to lower the monthly bill by 30 percent and restore equity in the home.

When the home is sold, 50 percent of any increase in its value goes to the government.

But it appears that H4H is turning out to be just one more failed attempt to break the foreclosure crisis, as less than 100 people applied for the program last month. The FHA projects that only 13,300 struggling homeowners will actually use the program in the first year. (Learn more about H4H…)

There are a few reasons why this program isn’t as successful as expected:

1.     Lenders, who’s participation is purely voluntary, are hesitant to participate in H4H because they would lose big money on each home that is refinanced. Also, the FHA won’t back the refinanced mortgage if the borrower misses the first payment—a loophole that leaves banks nervous in agreeing to participate.

2.     Mortgage security investors, who now own most of the troubled loans, would also lose a big chuck of change. Most lenders and investors want to wait and see if new government programs will be created that may benefit them better.

3.     Homeowners don’t like the idea of sharing future appreciation in their home’s value with the government. They also have to pay an annual insurance premium of 1.5 percent of the loan balance, which is more than three times the typical FHA fee.

The H4H program may be able to help some people who are struggling to make their mortgage payments; however, because of lack of lender participation and undesirable fine print rules for homeowners, it looks like it may just be another big government “flop”.

For other ways to possibly save your home from foreclosure, check out this Total Bankruptcy resource:

• Chapter 13 Bankruptcy and Foreclosure