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Laurie Anne Maggiano, Senior Policy Advisor Office of Single Family Asset Management

HOPE for Homeowners(H4H)

Servicing

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Servicing H4H Loans

Preserving

the Dream

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• First mortgage serviced by holder/designee

• SEM and SAM mortgages serviced by

U.S. Department of HUD

c/o C&L Service Corp./Morris-Griffin Corp.

2488 East 81st Street, Suite 700

Tulsa, Oklahoma 74137

H4H – Loan Servicers

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• Standard FHA Requirements

• Loss Mitigation

• Prohibition on Subordinate Financing

• Refinance Restrictions

H4H – First Mortgage Servicing

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Home Retention Options

Special Forbearance – no change

Modification – HUD will subordinate SEM and SAM

Partial Claim – Subordination not required

H4H – Loss Mitigation

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Disposition Options

Pre-Foreclosure Sale – use existing ratios, $2,000 allowance for lien payoff only available for preservation liens

Deed-in-Lieu – $2,000 allowance for lien payoff only available for preservation liens

H4H – Loss Mitigation

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Impact of 1st Payment Default

Servicer must provide loss mitigation

HUD unable to pay claim

H4H – Loss Mitigation

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5-year prohibition on any

subordinate financing

except to

preserve and protect the property

H4H – Subordinate Financing

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• Only for health and safety or property deterioration • No cosmetic or routine maintenance• Cost must be reasonable• Closed-end loans only – no HELOCs• Loan cannot reduce HUD’s equity share • CLTV = to or less than 95% of new appraisal

Contact NSC for approval

H4H – Subordinate Loan Requirements

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• No refinance in year 1• No FHA streamlined refinance ever• No refinance to reverse mortgage• Limits on accessing equity and

appreciation• Any refinance must payoff SEM

H4H – Refinance Restrictions

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Equity Refinance

Equity Refinance Only in Years 2 to 5

30 year/fixed with lower payments

Proceeds must pay off HUD’s equity share

Only initial and earned equity can be used

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Property value at origination $100,000

Initial H4H loan balance $ 90,000

Loan balance 3 years after orig. $ 89,000

Property value after year 3 $110,000

Principal pay off $ 89,000

Initial and earned equity $ 11,000

Max refinance amount $100,000

Equity Refinance Example

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• New P&I must be lower than H4H mortgage

• $7,000 (70%) of proceeds must be used to pay off SEM

• Borrower has $5,000 for transaction costs and proceeds

• No impact on SAM

Equity Refinance Example (Cont’d)

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Limited Appreciation Refinance After Year 5

Cash out limited to initial and earned equity and 25% of appreciation

SAM modified to state fixed amount of appreciation due to HUD plus 50% of future appreciation

Appreciation Refinance

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Property value at origination $100,000

Initial H4H loan balance $ 90,000

Loan balance in year 6 $ 88,000

Property value year 6 $120,000

Principal pay off $ 88,000

Initial and earned equity $ 12,000

25% of appreciation $ 5,000

Max refinance amount $105,000

Appreciation Refinance Example

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• $5,000 of proceeds must be used to pay off SEM

• Borrower has $12,000 for transaction costs and proceeds

• SAM modified to reflect $10,000 due to HUD plus 50% of future appreciation

Appreciation Refinance Example (Cont’d)

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• SEM and SAM must be paid on sale

• Closing agent sends payoff demand and appraisal

• NSC receives SEM/SAM proceeds

• NSC pays ASC holders in exchange for surrender of certificates

Sale and Payoff of H4H Loans

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• Equity = value at origination less H4H loan amount

• Sliding scale for equity shareDuring Year 1 100% of equity due to FHADuring Year 2 90% of equity due to FHADuring Year 3 80% of equity due to FHADuring Year 4 70% of equity due to FHADuring Year 5 60% of equity due to FHAAfter Year 5 50% of equity due to FHA

H4H – Equity Share Payoff

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• Earned equity (decrease in loan balance) is property of the borrower unless net proceeds are not enough to pay FHA’s share

H4H – Equity Share Payoff (Cont’d)

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• SAM due only on sale – may not be paid earlier

• Appreciation = net proceeds from sale less appraised value at origination

• Arms length transaction

• Limit on closing costs

• Credit for capital improvements

H4H – Appreciation Share Payoff

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• Appreciation reduced by 75% of cost of capital improvements if

Cost was greater than $2,500Borrower can provide invoicesWork significantly enhanced property value Cost was reasonableNo interior décor, routine landscaping, or

repairsNo allowance for sweat equity

H4H – Capital Improvement Credit

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• H4H loans will not be included in Tier Ranking Scores

• Tier 1 lender benefits will apply to H4H claims

H4H and Tier Ranking

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NSC will monitor H4H loans through

Statistical analysis of lender default and FC rates

Servicing Desk Reviews

Referral to Quality Assurance/Mortgagee Review Board for noncompliance findings or failure to engage in loss mitigation

Monitoring H4H Servicers

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National Servicing Center

• FHA Call Center – 1-800-Call FHA

• Policy Guidance – hsg-lossmit@hud.gov

• Data Requests – sfdatarequests@hud.gov

H4H Servicing Help