Post on 10-Oct-2020
Helping Alabama Homeowners Face Foreclosures
June 2, 2016 Montgomery, Alabama
Trainers: Sara Bolling Mancini
Geoff Walsh
National Consumer Law Center®
ABOUT THE NATIONAL CONSUMER LAW CENTER®
Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer
justice and economic security for low-income and other disadvantaged people, including older
adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation,
expert witness services, and training.
Acknowledgements
We would like to thank the following for their generous support for this training program:
the Alabama Law Foundation, the Alabama Civil Justice Foundation, the Alabama Center
for Dispute Resolution, the Alabama State Bar Volunteer Lawyers Program, the Birmingham
Volunteer Lawyers Program, Legal Services Alabama, Madison County Volunteer Lawyers
Program, Montgomery Volunteer Lawyers Program, and the South Alabama Volunteer
Lawyers Program. Special thanks to Tracy Daniel for helping us to organize the event.
© 2016 National Consumer Law Center® - Materials included in this book cannot be copied or reproduced in any way
without the express written permission of NCLC®.
Presenter Biographies
Sarah Bolling Mancini is Of Counsel to the National Consumer Law Center and a staff attorney
in the Home Defense Program of the Atlanta Legal Aid Society, Inc. Sarah graduated from
Harvard Law School in 2007 and received a Skadden Fellowship for public interest work. She
clerked for the Honorable Amy Totenberg, U.S. District Court for the Northern District of
Georgia. Sarah has advocated for vulnerable homeowners facing predatory mortgage lending
practices and the threat of foreclosure in state court, federal court, and bankruptcy court. She
compliments her individual client representation with media outreach and policy
advocacy. Sarah is a co-author of Georgia Real Estate Finance and Foreclosure Law, Collier on
Bankruptcy, and NCLC’s Mortgage Lending, Foreclosures and Mortgage Servicing, and Truth
in Lending treatises.
Geoff Walsh is a staff attorney at NCLC who focuses on foreclosure prevention, consumer
bankruptcy, and other consumer credit issues. He has provided written testimony and engaged in
policy advocacy at the federal and state levels on the topic of foreclosure mediation. He has
served as a panelist and instructor at trainings and legal education seminars on foreclosure
prevention and bankruptcy topics. Geoff previously worked as an attorney with Vermont Legal
Aid, Inc. in Springfield, Vt. from 1991 to 2008, specializing in housing, consumer, and
bankruptcy areas. From 1980 to 1991, he worked as a staff attorney with Community Legal
Services, Inc. in Philadelphia, Pa., where he also specialized in housing and consumer litigation.
Geoff earned his B.A. from University of Michigan and is a graduate of Temple University Law
School. He is co-author of NCLC's Foreclosures and contributor to Consumer Bankruptcy Law
and Practice, Fair Debt Collection, Student Loan Law, and Credit Discrimination.
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Helping Alabama Homeowners Face Foreclosures Montgomery, Alabama
June 2, 2016
Agenda 9:15 a.m. -- 9:30 a.m. Introduction and Overview
9:30 a.m. -- 10:30 a.m. Identifying and Understanding the Players
(Geoff Walsh) Investors, Servicers, Trusts
Securitization and Pooling and Servicing Agreements Servicer Incentives Overview of types of loans
10:30 a.m. -- 10:45 a.m. BREAK 10:45 a.m. -- 12:15 p.m. HAMP and Other Loss Mitigation Protocols
(Sarah Bolling Mancini) Modification waterfalls Net Present Value Tests HAMP Overview and phase-out GSE options Non-Modification Options Government-Insured Options (FHA) 12:15 p.m. -- 12:45 p.m. LUNCH 12:45 p.m. -- 1:45 p.m. The CFPB Mortgage Servicing Rules
(Geoff Walsh) Scope
Requests for Information Requests to Correct Errors Loss Mitigation Reviews Dual Tracking Protections Related Servicing Regulations
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1:45 p.m. -- 2:45 p.m. Loss Mitigation for Successors (Sarah Bolling Mancini)
Effects of marital dissolution Heirs and estate issues Role of non-borrowers Policies of Regulators and Insurers
2:45 p.m. -- 3:00 Break 3:00 p.m. -- 4:00 p.m. Intersection of Foreclosure and Bankruptcy
(Sarah Bolling Mancini) Essential Bankruptcy Concepts Chapter 13 Basics What Bankruptcy Can and Can’t Do Post-Bankruptcy Issues 4:00 p.m. -- 4:15 p.m. Overview of Tax Issues
(Geoff Walsh) Discharge of Indebtedness Income Tax Acquisition Indebtedness
4:15 pm. -- 4:30 p.m. Role of Mediation in Loss Mitigation
(Geoff Walsh) Good Faith in Negotiations National Perspective
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Helping Alabama Homeowners Face Foreclosures Montgomery, Alabama
National Consumer Law Center®
June 2, 2016
Table of Contents
I. IDENTIFYING AND UNDERSTANDING THE PLAYERS (STRUCTURE OF THE MORTGAGE
MARKET, SERVICERS, TRUSTS, REVIEWING POOLING & SERVICING AGREEMENTS)
PowerPoint Presentation .............................................................................................................................................. 1
Finding Pooling and Servicing Agreements Information Sheet .................................................................. 12
Sample Pooling and Servicing Agreement Excerpts (“CWABS 2006-15”) ............................................... 14
American Association of Mortgage Investors Policy Statement ................................................................. 36
II. INTRODUCTION TO HAMP AND OTHER LOSS MITIGATION PROTOCOLS
PowerPoint Presentation ............................................................................................................................................ 39
Flavors of HAMP Chart ................................................................................................................................................ 58
Making Home Affordable Program Summary ................................................................................................... 62
HAMP and Loan Modification Glossary ................................................................................................................ 69
Loan Modification Program Web Links ................................................................................................................ 70
Making Home Affordable Sample Request for Mortgage Assistance ...................................................... 72
GSE Sample Uniform Borrower Assistance Form .............................................................................................. 79
Government Insured Mortgage Programs PowerPoint Presentation ....................................................... 83
HUD’s FHA Loss Mitigation Priority Waterfall and Examples ....................................................................... 91
III. THE CFPB MORTGAGE SERVICING RULES
PowerPoint Presentation ............................................................................................................................................ 94
CFPB Rules 12 C.F.R. §§ 1024.35, 1024.36, 1024.41 ....................................................................................... 107
IV. LOSS MITIGATION FOR SUCCESSORS
PowerPoint Presentation ......................................................................................................................................... 121
Sample Loan Assumption Agreement and Note ........................................................................................... 132
CFPB Bulletin No. 2013-12 (servicer guidance on successor issues) ...................................................... 133
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V. THE INTERSECTION OF FORECLOSURE AND BANKRUPTCY
PowerPoint Presentation ......................................................................................................................................... 140
VI. OVERVIEW OF TAX ISSUES
PowerPoint Presentation ........................................................................................................................................ 156
VII. THE ROLE OF MEDIATION IN FORECLOSURES
PowerPoint Presentation ......................................................................................................................................... 159
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©National Consumer Law Center 2013
Owners, Servicers, Trusts:Identifying and Understanding the
Players
Alabama Foreclosure Training
June 2, 2016
$$
Borrower
Lender
RMBS Securitization Map
$$$
Originator
Processes and funds
individual loans
Note &
Mortgage
$$$
MortgagePayments
Borrower
$$$
$$$
Interim Servicer
Services loans until
securitized
Primary ServicerServices individual loans, collects
payments, performs duties under PSA
Master ServicerPrepares reports for Trustee; remits
monies; ensures Primary performs
$$$
Pool revenue less
servicing fee
SellerPurchases loans from
originator; forms pool
Note &
Mortgage
Depositor
Creates issuing entity
Note &
Mortgage
TrustHolds pool of loans; issues
certificates
Note &
Mortgage
Trustee
Oversees servicers
$$$ fees
$$$ purchase price
$$$ purchase price
Underwriter
Sells certificates to investors,
collects proceeds
Certificates
Certificates$$$ offering
proceeds
Various Classes
Investors/Certificate Holders
Purchase mortgage-backed securities as defined in certificates
Certificates$$$ offering
proceeds
$$$ less servicing fee
$$$ less
Trustee’s fee
Other parties not shown may include Credit Risk Manager,
Securities Administrator, Swap Counterparty, and Rating
Agencies
MLPA
PSA
PSA
PSA
PSA
MLPA
or PSA
Document
CustodianStores and maintains
mortgage loan collateral files
Collateral
File
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
1
2
Securitization: Practical
Problems
• Who has authority?
– to modify the loan
– to settle
– to litigate
• Who has the documents?
– the note
– the mortgage
– the loan file
Who Owns the Loan?
• Loans “held in portfolio”
– Traditional way of holding loans
– Whole loans
– Easier to modify
• Securitized loans
– Owned by bond holders via a trust
– Tranches, Ownership divided
– PSA limits ability to modify
Who’s Who in Securitization
• Lender/Originator
• Sponsor/Seller
• Depositor
• Underwriter
• Trust/Trustee
• Servicer
• Custodian
• Rating Agencies
• Insurers
• Investors
2
3
RMBS Securitization Map
$$$
Originator
Processes and funds
individual loans
Note &
Mortgage
$$$
MortgagePayments
Borrower
$$$
$$$
Interim Servicer
Services loans until
securitized
Primary ServicerServices individual loans, collects
payments, performs duties under PSA
Master ServicerPrepares reports for Trustee; remits
monies; ensures Primary performs
$$$
Pool revenue less
servicing fee
SellerPurchases loans from
originator; forms pool
Note &
Mortgage
Depositor
Creates issuing entity
Note &
Mortgage
TrustHolds pool of loans; issues
certificates
Note &
Mortgage
Trustee
Oversees servicers
$$$ fees
$$$ purchase price
$$$ purchase price
Underwriter
Sells certificates to investors,
collects proceeds
Certificates
Certificates$$$ offering
proceeds
Various Classes
Investors/Certificate Holders
Purchase mortgage-backed securities as defined in certificates
Certificates$$$ offering
proceeds
$$$ less servicing fee
$$$ less
Trustee’s fee
Other parties not shown may include Credit Risk Manager,
Securities Administrator, Swap Counterparty, and Rating
Agencies
MLPA
PSA
PSA
PSA
PSA
MLPA
or PSA
Document
CustodianStores and maintains
mortgage loan collateral files
Collateral
File
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
RMBS Securitization Map
$$$
Originator
Processes and funds
individual loans
Note &
Mortgage
$$$
MortgagePayments
Borrower
$$$
$$$
Interim Servicer
Services loans until
securitized
Primary ServicerServices individual loans, collects
payments, performs duties under PSA
Master ServicerPrepares reports for Trustee; remits
monies; ensures Primary performs
$$$
Pool revenue less
servicing fee
SellerPurchases loans from
originator; forms pool
Note &
Mortgage
Depositor
Creates issuing entity
Note &
Mortgage
TrustHolds pool of loans; issues
certificates
Note &
Mortgage
Trustee
Oversees servicers
$$$ fees
$$$ purchase price
$$$ purchase price
Underwriter
Sells certificates to investors,
collects proceeds
Certificates
Certificates$$$ offering
proceeds
Various Classes
Investors/Certificate Holders
Purchase mortgage-backed securities as defined in certificates
Certificates$$$ offering
proceeds
$$$ less servicing fee
$$$ less
Trustee’s fee
Other parties not shown may include Credit Risk Manager,
Securities Administrator, Swap Counterparty, and Rating
Agencies
MLPA
PSA
PSA
PSA
PSA
MLPA
or PSA
Document
CustodianStores and maintains
mortgage loan collateral files
Collateral
File
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
RMBS Securitization Map
$$$
Originator
Processes and funds
individual loans
Note &
Mortgage
$$$
MortgagePayments
Borrower
$$$
$$$
Interim Servicer
Services loans until
securitized
Primary ServicerServices individual loans, collects
payments, performs duties under PSA
Master ServicerPrepares reports for Trustee; remits
monies; ensures Primary performs
$$$
Pool revenue less
servicing fee
SellerPurchases loans from
originator; forms pool
Note &
Mortgage
Depositor
Creates issuing entity
Note &
Mortgage
TrustHolds pool of loans; issues
certificates
Note &
Mortgage
Trustee
Oversees servicers
$$$ fees
$$$ purchase price
$$$ purchase price
Underwriter
Sells certificates to investors,
collects proceeds
Certificates
Certificates$$$ offering
proceeds
Various Classes
Investors/Certificate Holders
Purchase mortgage-backed securities as defined in certificates
Certificates$$$ offering
proceeds
$$$ less servicing fee
$$$ less
Trustee’s fee
Other parties not shown may include Credit Risk Manager,
Securities Administrator, Swap Counterparty, and Rating
Agencies
MLPA
PSA
PSA
PSA
PSA
MLPA
or PSA
Document
CustodianStores and maintains
mortgage loan collateral files
Collateral
File
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
3
4
RMBS Securitization Map
$$$
Originator
Processes and funds
individual loans
Note &
Mortgage
$$$
MortgagePayments
Borrower
$$$
$$$
Interim Servicer
Services loans until
securitized
Primary ServicerServices individual loans, collects
payments, performs duties under PSA
Master Servicer
Prepares reports for Trustee; remits
monies; ensures Primary performs
$$$
Pool revenue less
servicing fee
SellerPurchases loans from
originator; forms pool
Note &
Mortgage
Depositor
Creates issuing entity
Note &
Mortgage
TrustHolds pool of loans; issues
certificates
Note &
Mortgage
Trustee
Oversees servicers
$$$ fees
$$$ purchase price
$$$ purchase price
Underwriter
Sells certificates to investors,
collects proceeds
Certificates
Certificates$$$ offering
proceeds
Various Classes
Investors/Certificate Holders
Purchase mortgage-backed securities as defined in certificates
Certificates$$$ offering
proceeds
$$$ less servicing fee
$$$ less
Trustee’s fee
Other parties not shown may include Credit Risk Manager,
Securities Administrator, Swap Counterparty, and Rating
Agencies
MLPA
PSA
PSA
PSA
PSA
MLPA
or PSA
Document
CustodianStores and maintains
mortgage loan collateral files
Collateral
File
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
Mortgage BrokerReceived broker’s fee, YSP
and processing fees
Pooling and Servicing Agreement
• Usually attached to a “prospectus,” filed with SEC for public securitizations, available at www.sec.gov. See specific instructions in the materials.
• Prospectus identifies the players and is a good source of information on the underwriting standards and characteristics of the loans anticipated to be in the pool.
• PSA will usually specify who can institute foreclosure proceedings.
• PSA will set out guidelines and authority for modifying loans or approving other workout options.
• PSA will provide information on where the notes and mortgages should have travelled.
Pooling and Servicing
Agreement and Prospectus
Example:
• Named foreclosing party is “Bank of New
York as Trustee for CWABS Asset-Backed
Certificates Trust 2006-15”
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Who Are Servicers?
• Servicers not the same as investors,
holders, or lenders
• Servicers accept the payments and pass
on to the trust
• Servicers’ compensation largely
independent of loan pool performance
• Borrowers can’t hire or fire servicers
Investor Restrictions
Identifying the investor is critical:• GSE?• Federal agency like the FHA?
• None of the above? (typically a mortgage pool)
Mortgage Pools
Investors in mortgage pools have little say in which loans are modified and what guidelines will be used.
Servicers instead rely on PSAs
Government Sponsored
Enterprises (GSEs)
• Fannie Mae and Freddie Mac placed in government “conservatorship” in September 2008
• Federal Housing Finance Agency (FHFA) designated as federal agency to regulate the GSE’s
• Great influence over industry practices
• Publish guides for servicing GSE loans
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Government Insured Loans
• Three Federal agencies guarantee loans:
• Federal Housing Administration (FHA), a
department of HUD
• Rural Housing Service, part of USDA
• Veterans Administration
• RHS/USDA also makes direct single
family home loans
Loan Documents
• Note & Mortgage/DOT
• HUD-1 Settlement Statement
• TIL Disclosure
• Notice of Right to Cancel
• Loan Application
• Complete Payment History
MERS
• Mortgage Electronic Registration Systems, Inc.
• Established early 1990s by GSEs, large lenders to save money on recording fees
• MERS sells two basic services:
– Loan IDs (MIN Numbers) for members to use
– Signing authority - 20,000 individuals (employees of servicers & foreclosure mills) can sign documents as secretaries or vice presidents of MERS
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MERS
• What can be done in MERS’ name?
• Conduct a foreclosure sale?
• Provide a foreclosure notice?
• Assign a mortgage?
• Transfer a note?
Identifying the Servicer
• Homeowner usually knows
– check account statements
• Check MERS
– www.mers-servicerid.org (search by many methods)
– 888-679-6377 (search by MIN or SSN)
– MERS data on loan ownership is not reliable
• Servicing Transfer Notices 12 USC §2605(b)
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Identifying the Owners - TILA
• Servicer must, upon written request, provide borrower with contact information for the owner.
TILA 15 U.S.C. § 1641(f)(2)
• New Note owner must inform borrower of change in ownership within 30 days. TILA 15
U.S.C. § 1641(g)
• Statutory damages up to $4,000 per violation. 15 U.S.C. § 1640
Identifying the Owner - RESPA
• “Request for Information” under CFPB Mortgage Servicing Rules. 24 C.F.R. § 1024.36, also 12 U.S.C. § 2605(k)(1)(D)
• Servicer is required to respond to any written request for information “with respect to the borrower’s mortgage loan”
• Expedited response time frame: “Not later than 10 days (excluding legal public holidays, Saturdays, and Sundays) after the servicer receives an information request for the identity of, and address or other relevant contact information for, the owner or assignee of a mortgage loan.”
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Getting Information
• www.mersinc.org
• freddiemac.com/mymortgage/
• fanniemae.com/loanlookup/
• TILA § 1641(f)(2)
• RESPA 24 C.F.R. § 1024.36
Primary System of
Record
Electronic Loan
Boarding
Default Processing
Loss Mitigation
Vendor Management
Servicing Modules
Servicer of Performing Loans
Owners of NoteUsually Investors
via Trust
Master Servicer
Primary Servicer
Borrower
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Servicing in Foreclosure
(or Bankruptcy)
Note Owner MERS
National Counselfor foreclosure and bankruptcy
Special Servicer
Default Servicing(Fidelity National)
Local Counselfor foreclosure and bankruptcy
The Problem: Foreclosures Are
Costly
To homeowners
• Neighbors, probably $500 billion in 2009 alone
• Local governments, $20,000-$30,000 per foreclosure—tens of trillions of dollars
To communities
• Loss severities of 65%
• Average per home $145,000
• Billions of dollars
To investors
The Solution: Loan
Modifications
• Saves money for everyone (in theory)
• Net Present Value test– Measures benefit to investors
– Includes cure and redefault statistics
• Don’t know exactly how many loan mods would pass, but probably more than are being done given severity of losses to investors
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What Happens When There Is a
Foreclosure?
• Servicers get paid/ reimbursed for expenses first
• Investors take what’s left
• E.g.,– $400,000 loan
– $100,000 current value
– $50,000 in advances and expenses paid by servicer
– Servicer gets $50,000, investors get $50,000
– Investors have $350,000 loss
– Servicer has no out-of-pocket loss
How Does a Servicer Make
Money?
• Monthly servicing fee
• Default fees and costs
• Servicers want to increase the size of the
pool and pile on fees
– Capitalization mods
– Up-front fees
– Fee padding
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Finding Pooling And Servicing Agreements (PSA’s) For Securitized Mortgage Loans
The “Pooling and Servicing Agreement” is the legal document that contains the responsibilities and rights of the servicer, the trustee, and others over a pool of mortgage loans. The Pooling and Servicing Agreement can be a stand-alone document or it can be part of another paper, usually called the “Prospectus.” If the securitization is public, these documents must be filed with the Securities and Exchange Commission (SEC), and will be available to the public at www.sec.gov. Locating a Pooling and Servicing Agreement on the SEC website can be a challenge. The most important information you will need to find the Pooling and Servicing Agreement is the name of the original lender and the title of the pool of loans. We will work through an example below. Assume that the lender is Ameriquest Mortgage Co. We don’t know the name of the pool that the homeowner’s mortgage ended up in, but we do know that the mortgage was made on June 1, 2002. Step One: Go to www.sec.gov and click on “Search for Company Filings” under “Filing & Forms (EDGAR).” Under “General-Purpose Searches,” click on “Companies & other filers.” Then, in the “Enter your search information” box, type in “Ameriquest” next to “Company name” and click on the “Find Companies” button. Step Two: The page you are now looking at shows a long list of the names of securitized pools of loans. We know the mortgage was made on June 1, 2002. Look for the entry titled “AMERIQUEST MORT SEC INC ASS BK PAS THR CERTS SER 2002 2.” The document number is CIK 0001175125. Click on that number. We selected this entry because it said 2002 on it and the loan in question was made in 2002. There may be several other pools of mortgage loans that Ameriquest securitized in 2002 but this is the first one we come to on this list (when reviewed in late February 2007) so we will pull it up. Step Three: Now you see a list of documents filed with the SEC that are related to this pool of loans. Scroll down to the bottom and you will see a document titled “Prospectus.” This is the document that will likely be the one you want, assuming that the mortgage loan you are concerned about is in this pool. We can only make an educated guess, unless you know the name of the securitized pool in advance (which is unlikely). Click on either “htm or text” next to this document and the Prospectus will appear. Now, bookmark this document on your web browser, so you can come back to it easily in the future. Note that this Prospectus is also contained on this CD-ROM for your use. Step Four:
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Is this likely to be the document you want? Scroll down to page S-2 and you will see a Table of Contents. Included in that is the “Pooling and Servicing Agreement” which starts on page S-76. Also, scroll down one more page, past the Table of Contents, and you will see a “Summary of Prospectus Supplement.” Certain important information is listed there, including the cut-off and closing dates for loans that will be included in this pool. The closing date is June 7, 2002. Based on this information, you can assume that this document governs the responsibilities of the servicer of the mortgage loan in question, unless that servicer tells you otherwise and can back it up with a reference to a different agreement or pool. Other important information listed in this Summary includes the title of the pool, and the identity of the servicer and trustee. The servicing rights may have been sold since this document was filed and the current servicer may be a different company but the trustee (the legal holder of the mortgage) should be accurate. Step Five: Go the Pooling and Servicing Agreement to find what you need to know. It should describe how the servicer is paid and by how much, who keeps late and other fees, what authority it has to modify the loan or engage in workouts with homeowners, and its obligations to pass mortgage payments on to the trustee. Congratulations! You are now entitled to an official Sherlock Holmes hat.
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900 19th
Street, N.W., #800, Washington, D.C. 20006 ∙202-327-8100 main ∙202-327-8101 fax
White Paper
The Future of the Housing Market for Consumers after the Crisis: Remedies to Restore and Stabilize American’s Mortgage and Housing Markets
January 2011
Summary: Investors in non-agency mortgage-backed securities are important stakeholders in the
negotiations between mortgage servicers and the multi-state attorney general task force. Mortgage
investors typically invest on behalf of state pension funds, retirement systems, university and charitable
endowments. Overall, more than 90 percent of the money invested in mortgage-backed securities
represents public money. These investors have suffered material losses as a result of faulty and
inefficient and at times improper servicing of the mortgage loans, for example, the improper analysis of a
borrower’s finances and holistic debt. Instead of helping homeowners, servicers’ interactions with
borrowers often make the process more confusing. This delays resolutions and can worsen the
homeowners’ position. The current servicing model further harms borrowers by dumping excessive fees
(ultimately recouped by servicers) on them during the modification process. More broadly, the abuses
and conflicts within today’s broken servicing model are creating longer term housing and mortgage
problems that impact large parts of the U.S. population. Mortgage investors, who have long advocated
improvements in the servicing business model, welcome and look forward to the review and the
involvement of the Attorneys General. The Attorneys General have a unique opportunity to set market
standards that benefit distressed homeowners and consumers without damaging investors or imperiling
the future of housing and mortgage finance.
Investors have historically testified that the issues underlying the current housing and foreclosure
problem result from a combination of bank-servicer abuses and a national consumer debt crisis. The
Attorneys General are poised to develop a national solution that helps distressed consumers and prevents
a repeated wave of foreclosures over the next two years.
Investors support effective, long-term, and sustainable solutions to the foreclosure crisis. We
break the solution down into two components: “Better Execution” and “Sustainable Solutions.”
1.) Better Execution: Resolving this crisis requires intermediaries to interact with consumers and
distressed borrowers in a fair and productive manner. This will require a paradigm shift within
the current mortgage servicing industry.
o Improve Servicing. Collections operations should be staffed at consistent levels across
the industry in the 120+ day delinquency bucket at not more than 100-150 accounts per
employee. These accounts should be assigned to a single point of contact until they
36
AMI
State Remedy Recommendations
January 2011
Page 2
become current or need to move to a more aggressive loan resolution. We also
recommend the use of special servicers which offer the enhanced counseling and
operational capacity to help consumers find a “right-sized” modification. This also gets
around the numerous existing servicer conflicts of interest, including second lien and
other consumer debt ownership, fees and representation and warranty issues. The
unwillingness of the owners of these other consumer debts to participate in the
modification/restructuring process is still a central issue.
An independent party needs to resolve all of the consumer debt issues. Mortgage
investors are willing to participate, but the other debt holders (e.g., credit card and auto
loans) have not been. This is discussed further in the Sustainable Solutions section
below.
o Transparency. Loss mitigation and the process of foreclosure should be transparent and
open to the homeowner. This process will require an increased effort on the part of the
mortgage servicing staff to educate the homeowner. The servicers’ first duty should be
explaining the legal process of foreclosure and the alternatives available for homeowners.
Improved and effective consumer debt strategies must continue to be refined. The
current practices of face-to-face interviews and field collection calls may be appropriate
options and should be increased and enhanced, as well as, developing improved web-
based video materials explaining the process.
The underlying mortgage and foreclosure data must be disclosed in a public and
transparent manner, including servicing fees, foreclosure expenses, and the actual asset
loss breakdown. The borrower and investor need to understand the full menu of
additional costs that might be incurred due to a foreclosure. The costs due to servicer
error are not to be reimbursed from the RMBS trust; such costs should be borne by the
servicer, not the trust. Finally, vulnerable borrowers must be protected from paying
egregious fees after falling behind on their mortgage payments.
o Investors do not have access (or servicers are blocking access) to the most basic
information about the mortgages, such as the loan files. To ensure that the housing and
mortgage system works for the years to come, transparency in the process is critical. The
Task Force should look to provide reasonable access to these loan files, which are held
for the benefit of investors as beneficiaries of the underlying trusts.
2.) Sustainable Solutions: Homeowners need lasting solutions that put them on a clear path to
affording their debts. Anything less than this just prolongs their distress and the ultimate
recovery of the U.S. housing market. In most situations, this requires a thorough review of all of
the consumer’s debts.
o Investors Support Sustainable Modifications. Modified consumer mortgage solutions
should include:
37
AMI
State Remedy Recommendations
January 2011
Page 3
(1) an option for the homeowner to re-establish a payment under a 31% front-end
debt-to-income ratio (DTI) (as determined by full documentation of current
income and assets, as well as a verification of hardship );
(2) a refinance at 97.75% LTV into the FHA Short Refinance program;
(3) reduction of all junior liens at a minimum of a proportional write-down; and,
Most importantly, all consumer debt should be restructured as part of the
modification. This includes second liens, home equity loans, and credit card and
auto debt. A sustainable mortgage will have combined loan-to-value (CLTV) no
greater than 115% and a back-end DTI of no greater than 50%. Without a
proper solution for high back-end DTI (consumer debt), it is inevitable that
borrowers will re-default even after a modification and the housing crisis will
continue.
o Bankruptcy/Binding Arbitration. Although mortgage investors are willing to participate
in the restructuring, the other debt holders, including subordinate and unsecured debts,
need to participate as well. This is a basic element of fixing a credit problem, whereby
all debts are taken into account, not just the most senior secured debt. To date, the other
debt holders have not participated. This is evident in the high modification re-default
rates and continued broader consumer distress in the economy and housing sector.
o A mechanism to ensure the other debt holders participate in the solution is critical to a
successful outcome. Some potential mechanisms include bankruptcy (whereby
mortgage investors agree to a “voluntary cramdown” – which will not require any
congressional legislation) or binding arbitration (whereby banks and servicers agree to
participate as part of settlement of past bad acts).
o Where a sustainable modification does not work, the servicer and/or counselor should
work with the borrower to efficiently avoid foreclosure, including completing a short sale
or deed in lieu. If the second lien is underwater, there needs to be a mechanism to bypass
their approval for these foreclosure avoidance measures.
Thank you for your consideration of these recommendations, for additional information about
these and other remedies, please contact the Association of Mortgage Investors at 202-327-8100 or
info@the-ami.org.
The Association of Mortgage Investors represents private investors, public and private pension funds, and
endowments, all of whom support the efforts of Congress, the Administration, and state officials to help
responsible, though distressed homeowners, avoid foreclosure. For more information, please visit
www.the-ami.org.
38
1
©National Consumer Law Center 2016
INTRODUCTION TO HAMP
Alabama Foreclosure Law Training
June 2, 2016
What Is HAMP?
• Home Affordable Modification Program
• Component of Making Home Affordable initiative.
• Uniform modification characteristics
– Payments reduced
• To 31% of gross monthly income for HAMP Tier 1
• By any amount for HAMP Tier 2
– Modification results in a positive Net Present Value (NPV) for investors
– Trial modification followed by permanent modification
Flavors of HAMP
Treasury’s HAMP
Participating servicers screen
everybody, subject only to investor
limits
GSE HAMP
All loans guaranteed/
owned by Fannie or Freddie must be
screened for GSE HAMP
Other governmental insured loans
FHA
VA
RHS
39
2
Finding Out If a Loan Is Covered
• List of participating servicers at makinghomeaffordable.gov
Standard HAMP
• https://knowyouroptions.com/loanlookupFannie Mae
• https://ww3.freddiemac.com/loanlookup/Freddie Mac
• HUD-1Governmental Insured Loans
Proprietary Mods
• Interest rate may not be permanently fixed
• May extend term before reducing interest
• No principal reduction typically
• Waivers may sneak in
Generally less
favorable than HAMP
Should be evaluated for proprietary mod after HAMP turndown
Payment Reductions Really Do Matter
Source: MHA Performance Report, 4Q 2015
40
3
Where Is There HAMP Guidance?
• Non-GSE: – Handbook (currently version 5.0)
– Supplemental Directives
– Model Forms – hmpadmin.com
• Fannie Mae: Fannie Mae Single Family Servicing Guide Subparts D2-3; F-1-18 (April 2016) (efanniemae.com)
• Freddie Mac: Bulletins & Chptr 9205 of Seller/Servicer Guide (March 2016) (freddiemac.com)
• FHA: Handbook 4000.1 (March 2016) (hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm)
• VA: Circulars (homeloans.va.gov/valeri.html)
• USDA: Final rule (75 Fed. Reg. 52429 (Aug. 26, 2010))
HAMP Is Floor, Not Ceiling
• Servicers can do
modifications that go
deeper than HAMP
and still receive
incentive payments
• Servicers can offer non-HAMP
modifications, although everyone should be screened
for and offered a HAMP mod
Participating Servicers Must Modify
Loans
• Servicers who sign contract must modify all eligible loans– Approximately 85% of eligible mortgage debt
covered by HAMP servicers– HSBC only major non-participating servicer
• Servicers of GSE loans must modify GSE loans (even if not a participating servicer)
• Servicers, not investors, participate• http://www.treasury.gov/initiatives/financial-
stability/TARP-Programs/housing/mha/Pages/contracts.aspx
41
4
10
1. Eligible to Apply?
2. Qualify for a Mod?
YES
NO
• Participating servicer• Payment > 31% (Tier 1)
• Default or Imminent Risk
HAMP: Basic Eligibility
• One to four unit residential property• Property is not vacant or condemned• Mortgage was originated on or before Jan. 1, 2009• Borrower is delinquent or faces imminent risk of default • Unpaid principal balance is no greater than
– 1-Unit: $729,700– 2-Unit: $934,200– 3-Unit: $1,129,250– 4-Unit: $1,403,400
• Property is borrower’s primary residence*• Current mortgage payments exceed 31% of borrower’s gross monthly income*• No prior HAMP Mod*
* = HAMP Tier 1 Rule (not Tier 2)11
Tie
r 1
HAMP Tier 1 Modification Analysis
• TWO PARTS
• Part 1: Waterfall to calculate affordable
modified payment
• Part 2: Net present value test – is this
modification in best interest of owners of
loan?
12
42
5
Modification Analysis
The “Waterfall” • Determines the modified terms of the loan hypothetically.
• The goal is to reduce the borrower’s monthly payment to 31% of gross monthly income.
– This is the Target Payment
• Payment includes principal, interest, taxes, insurance and, if applicable, association fees (“PITIA”).• Net present value test – is this modification in best interest of owners of loan?
13
31% of What? Income
• Gross income for all borrowers
• Unemployment income excluded
Doing the Math
Multiplier
Non-taxableincome
125%
Rental income 75%
• Non-wage income (including baby-sitting and odd-jobs) less than 20% does not need to be documented; all other income does
• Some income is optional, at borrower’s election− Child support or alimony− Income of non-borrower household members
Incentives
Borrowers, servicers, and investors all receive
payments for modifications
Payments are only for permanent modifications
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6
HAMP Mods Are Standard Mods
Capitalize arrearages
Reduce interest rate
Extend amortization term to up to 40 years
Principal forbearance
Payment reduced to 31% of the gross income
Waterfall Analysis
Proceeds sequentially through the waterfall, unless
PSA forbids one step or
Principal reduction substituted for any step
Driven by target payment
Capitalization of Arrearages=Principal Debt
Increases
Capitalized arrearage includes:
• Past due principal and interest• Escrow deficiencies/advances, though doesn’t
have to be. • Foreclosure costs
• Servicing fees: property inspections, credit report fee
CANNOT include:
• Late fees: unpaid fees will be waived• Additional modification fees: no charge for
HAMP
44
7
Interest Rate Reduction
• Reduced to as low as 2% for 5 years (to get to 31%)
• Can go lower, but incentives only paid down to 2%
• Increase at 1% after 5 years to lower of – Freddie Mac rate
– Interest rate cap in note
• Once rate increases to cap, fixed for life of loan.
Amortization Term
• Payments extended up to 40 years
• Term can be extended even if payments
can’t be � balloon payments
Principal Forbearance vs. Principal
Reduction
• Principal forbearance—interest free forbearance of principal until loan paid off �large balloon payments
• Servicers required to run an NPV analysis including principal reduction and investor incentives for principal reduction if LTV > 115%, but need not implement it
• Borrowers who stay current receive up to $1,000 a year in principal reduction for 5 years
45
8
NPV Test
• Measures the benefit to the investor of a loan mod– Not servicer
– Not borrower
• Weighs value and probability of unmodified loan vs. modified loan
• A pass means value of loan mod, in present terms, allowing for possibility of redefault, is
greater than the value of the loan unmodified
Modified vs. Unmodified Loan
Unmodified Loan
• Current payments
• Chance of foreclosure• What the foreclosure net will
be
Modified loan
• Modified payments
• Chance of foreclosure after loan mod (redefault)
• What the future foreclosure net will be
What Is a Modified Loan Worth?
Value of payments
• Interest rate
• Discount rate
• How long will payments be made
Chance of redefault
• Numbers drop with
• Payment reduction
• Principal reduction
• HAMP mods
46
9
Two Public NPV Versions
• HAMP NPV (CheckMyNPV.com)
– Standard used by all HAMP servicers
– Available to May 1, 2018
• FDIC Loan Mod in a Box– http://www.fdic.gov/consumers/loans/prevention/NPVCalculator.html
• Can use either to check NPV with
– Computer
– Internet
– Excel
– Basic info from servicer and homeowner
• Both produce the terms of the HAMP modification
Applying for HAMP
Submission of “Initial Package” triggers servicer’s duty to review for HAMP
• Request for Modification and Affidavit (RMA)
• 4506T-EZ form
• RMA and 4506T-EZ Forms available at makinghomeaffordble.gov or hmpadmin.com
• Proof of income
• Checklist available at http://makinghomeaffordable.gov/checklist.shtml
If Approved . . . .
• 3 month Trial Period Plan – Arrears will accrue during trial. Payments are held
in suspense and only credited when equal to full monthly payment under note.
– Will be reported to credit bureaus as either in default or making payments under a plan
• Will be converted to permanent modification upon completion of trial modification– Borrower should not be penalized for servicer’s failure
to timely convert
• If fails trial period: no further HAMP Tier 1 mod. “1 bite at the apple.”– Unless servicer set payments too high
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10
Conversions
• Conversions to permanent mods often
stalled
• If no mod, then arrearages due in lump
sum
• If mod, capitalize arrearages
– After effective date of trial plan (when permanent mod was supposed to start)
interest accrues at reduced rate
Delayed Conversions
Trials Aged 6+ Months (Percent of all Active Trials)
Source: MHA Quarterly Performance Report, 4Q 2015
If Denied . . . .
• Written denial notices providing basis of
denial must be provided
• Borrower has, in general, 30 days to
challenge denial
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11
Investor Restriction Denials
• HAMP doesn't override PSAs, but the program follows the “usual and customary industry standards”
• Vast majority of all PSAs permit modifications• If the PSA only prohibits one step in the
HAMP waterfall, servicer must still modify, omitting only the prohibited step
• Servicers expected to use “all reasonable efforts” to get waivers
• 15 U.S.C. §1639a creates safe harbor from investor litigation for servicers who modify under HAMP
NPV Denials
• If an NPV test was run, even if not the reason for the denial, borrower is entitled to all inputs (2.3.2)
• If borrower identifies an error, and changing the error results in a different NPV result, the servicer must re-run the NPV
• The servicer should only change the value corrected by the homeowner; no other values should change
• CheckMyNPV.com
Excessive Forbearance Denials
Standard language in
denial letter says:
• We are unable to offer you a Home Affordable Modification because we are unable to create an affordable payment equal to 31% of your reported monthly gross income without changing the terms of your loan beyond the requirements of the program
49
12
What Is Excessive Forbearance?
Principal forbearance greater than
(i) 30 percent of the UPB (after capitalization under Step 1) or
(ii) UPB less the current mark-to-market.
Can an Excessive Forbearance Be Resolved?
Substitute principal reduction for all or part of the excessive forbearance
Income increased, or escrow decreased may also reduce the required forbearance
Is the interest as low as it can go?
What Isn’t Grounds for Denial
“Insufficient income”
• Low income can cause NPV failure or excessive forbearance denial, but can’t be denied solely on low income.
High DTI
• Back end DTI over 55% formerly required the promise of housing counseling, but was never a basis for denial
Bankruptcy
• Borrowers in an active bankruptcy filing must be considered
• Borrowers cannot be denied because of prior bankruptcy filing
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13
Common Servicer Violations
• Failure to process application in a timely way
• Failure to convert
• Requiring resubmission of income information
• Asking for an upfront downpayment
• Telling homeowners they have to be in default
• Using incorrect income information in processing NPV
• Inserting waiver into the documents
Escalations
• Every servicer supposed to have a designated teamInhouse
• resource_center@fanniemae.com
• Phone: 1-800-7FANNIEFannie Mae Loans:
• borrower_outreach@freddiemac.com
• Phone: 1-800-FREDDIEFreddie Mac Loans:
• escalations@hmpadmin.com
• Phone: 1-866-939-4469; Fax: 1-240-699-3883
Non-GSE Loans --HAMP Solution
Center:
HAMP Tier 2
• Started June 1, 2012
• Offered to people who fail or are not eligible for standard HAMP mod
• Offered for investment properties (not owner-occupied)
• Loan mods not as well tailored to individual circumstances, but broader eligibility– Cookie cutter mods that aren’t based on borrower
income– Interest rate will not go as low; fixed at standard rate– Principal forbearance if underwater sufficiently,
whether you need it or not
39
51
14
HAMP Tier 2: Plan B
• If not eligible for HAMP– Failed NPV test
– Excessive forbearance
– Not owner-occupied
– Payments already under 31%
• Failed a previous HAMP trial or permanent mod– If permanent mod, either
• 12 months since effective date or
• Change in circumstances
40
HAMP Tier 2: Terms
• Driven by modification characteristics, NOT by payment or affordability
– Resulting modification must lead to a payment within acceptable DTI range
– Servicer may require payment reduction
• Fixed interest rate (Freddie Mac Primary
Mortgage Market Survey)
• Standard amount of forbearance
• No borrower pay-for-performance incentives41
HAMP Tier 2 Waterfall
• Loan is modified by
– Capitalizing arrears
– Principal forbearance (if LTV > 115%)
– Reducing interest rate
– Extending term to 480 months
• NPV test
• Modified loan checked against affordability requirements
– DTI must fall within acceptable DTI range (10-55% or 25-42%, depending on the servicer)
– Payment reduction requirement (varies by servicer)
42
52
15
GSE HAMP
• Determining if the loan is owned by Fannie
or Freddie:
• fanniemae.com/loanlookup/
• https://ww3.freddiemac.com/loanlookup/
(note: requires last 4 digits of borrower’s
SSN)
43
GSE-HAMP: Basic Differences
• No Servicer Participation Agreement
• No investor bar on HAMP modifications
• Standard application form (Form 710, not RMA)
• No principal forgiveness allowed in borrower-initiated applications
• No optional forbearance beyond program
guidelines
HAMP Tier 1 = GSE-HAMP
• Basically the same waterfall of steps to
reach affordable payment (31% DTI)
– But no principal forgiveness allowed (still can have forbearance)
• Anything better than -$5,000 is a “passing”
NPV result = approval!
45
53
16
HAMP Tier 2 = “Standard Mod”
• Very similar to HAMP Tier 2 calculations
• IF the LTV is at least 80%... If not, different
rules apply…
• Acceptable DTI range is 10-55%
• Interest rate is fixed at the:
– Fannie Mae Mod Rate (4% as of 2/13/15), or
– Freddie Standard Mod Rate (4% as of
2/13/15)
46
Standard Mod for LTV < 80%
• Capitalize arrearage
• Interest rate:– If fixed-rate now, keep the same interest rate
– If adjustable now, fix at Fannie Mae Mod Rate if current rate is lower; or fix at current rate
• Term: Offer the borrower up to 3 options:– 480 months if <= current P&I payment
– 360 months if P&I payment reduced by 20%
– 240 months if P&I payment reduced by 20%
47
When Does HAMP End?
HAMP is currently slated to end Dec. 30, 2016
Initial package must be placed in the mail/ faxed/ emailed no later than that date
Permanent modification in
effect as of September 30,
2017
54
17
Scope of Termination
• Termination applies to array of MHA Programs
• HAMP Tier 1
• HAMP Tier 2
• HAMP Streamlined Modification
• 2MP Second Lien Modification
• HAMP – UP
• HAFA (DIL, Short Sale)
And Outside Treasury HAMP
• Other HAMP Programs ending
• GSE-HAMP – December 31, 2016 for
applications and September 30, 2017 for
Modification Effective Date
• FHA-HAMP - not clear
• RHS and VA HAMP ?
Timing of Treasury-HAMP Phase-Out
• Servicers can stop soliciting September 1, 2016
• Borrower must submit an “Initial Package” by December 30, 2016 for HAMP Tier I and Tier II
• “Effective Date” of permanent modification must be before September 30, 2017
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18
Review: What is an “Initial Package?”
• “Initial Package” that must be submitted by December 30, 2016 consists of:
• Request for Mortgage Assistance “RMA” Form
• Either (i) IRS Form 4506-T or 4506T-EZ or (ii) a signed copy of the borrower’s tax return for the most recent tax year (servicers may not reject an Initial Package that includes either the borrower’s complete tax return for the most recent tax year orthe IRS Form 4506-T or 4506T-EZ)
• Evidence of income
• Dodd-Frank Certification (part of the RMA Form)
Review: What is Evidence of Income?
• “Evidence of Income” means:
• Each wage earning borrower must provide copies of two recent pay stubs, not more than
90 calendar days old at time of submission, indicating year-to-date earnings.
• Each self-employed borrower must provide
his or her most recent quarterly or year-to-date profit and loss statement. Audited
financial statements are not required.
“Streamline” Modifications
• One likely future replacement for HAMP modifications
• Based on similar GSE model now available since 2013
• Treasury HAMP Streamlined modification available since Jan. 1, 2016
• Basic HAMP eligibility requirements apply, but need not submit Initial Package
• Eligible if defaulted or were ineligible for a past Tier I or Tier II modification in past
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19
Streamline Modification Procedure
• Automatic offer at 90 days delinquency
• Servicer reviews defaulted loans on portfolio basis, selects NPV positive loans for Streamlined mod offers
• NPV process not public
• Offer/terms not based on borrower income, only on loan terms and property value (info in servicer’s file)
• Borrower accepts Streamlined TPP offer by making first payment and then completing application
• Permanent Streamlined mod executed after completing TPP and submitting application
Policy Issues
• What will replace HAMP?
• Models targeting affordability – target a percentage of income payment, like current HAMP and FHA HAMP
• Cookie cutter models – current GSE mods, HAMP Tier II, Streamline mods (capitalize arrears, fixed interest rate reduction and fixed term extension, maybe limited principal forbearance)
57
5/24/2016
1
FLAVORS OF HAMP CHART
1
Borrower EligibilityHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-HAMP
Who Is Eligible? Only owner-
occupied
properties
Owner-occupied
and “rental
properties”
Owner-
occupied GSE
loans
GSE loans Owner-occupied
FHA-insured
mortgages
Second Bite at
the Apple (can
you get if prior
mod)?
No Yes (prior Tier 1,
not prior Tier 2)
No Yes, after 12
months
Yes, after 24
months & change
in circumstances
Hardship
Required
No Yes, if mortgage
on rental
property
Yes Yes Yes
Borrowers in
Bankruptcy
Eligible?
Yes Yes Yes
Imminent
default
Yes, servicer-defined Yes, GSE-defined, must involve
death, divorce, or disability
unless indicator is “1”
Yes, Handbook
4000.1, p. 616
2
Loan and Property Eligibility
HAMP Tier 1 HAMP Tier 2 GSE HAMP GSE
Standard
Mod
FHA-HAMP
Loan
originated
Before January 1, 2009 Before
January 1,
2009
12 months
before
default
12 months
before default
MTM-LTV No limit, though NPV will forbid
significant equity
No limit,
though NPV
will forbid
significant
equity
Different
rules apply
for LTV
<80%
No limit
3
58
5/24/2016
2
Mod ApplicationHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-HAMP
Application
Form
RMA Form 710 No standard
form
Where Rules
Are
hmpadmin.com, MHA
Handbook, Chapter II
Seller-Servicer Guide,
available through web sites
HUD
Handbook
4000.1,
Mortgagee
Letters,
available at
HUD’s
website
When Does
the Program
End?
Applications must be received
by Dec. 30, 2016
Application
must be
received by
Dec. 31,
2016
No deadline No deadline
In Active Yes, although escalations may Yes Yes Yes
4
Mod SolicitationHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE
Standard
Mod
FHA-HAMP
Solicitation
Required?
Yes No Yes Yes
Time for
Solicitation
Within 61
days of
missed
payment
None 31-35 days after missed
payment
Within 32
days of
missed
payment
5
EvaluationHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE
Standard
Mod
FHA-HAMP
Investor
Restrictions
Yes, but must seek waiver No No No
NPV Test Yes Yes No No
Order of
Evaluation
HAMP Tier 1 first GSE-HAMP first Only after
other loss
mitigation
options
evaluated &
rejected
Back-end DTI No cap No cap No cap No cap No cap
6
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5/24/2016
3
Mod TermsHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-HAMP
How mod
terms are
set
Driven by
payment
Rigid
application of
formula
Driven by
payment
Rigid
application of
formula
Driven by
payment
Capitalize
arrears
Yes Yes Yes Yes Yes
Interest rate Can go as low
as 2%
PMMS +
margin for risk
(-0.5%, as of
1/1/15)
Can go as
low as 2%
3.625%, as of
5/13/16
PMMS + 25
basis points
(3.875%, as
of 5/17/16)
Term
Extended
Up to 480
months
480 months Up to 480
months
480 months 360 months
7
Target PaymentsHAMP Tier
1
PITIA
HAMP Tier 2
PITIA
GSE
HAMP
GSE
Standard
Mod
FHA-HAMP
PITI
Current
Payment
> 31% DTI No requirement >31% DTI No req’t No req’t
Minimum
payment
reduction
Any amount 10% for BOA,
Wells, Chase;
Any amount for
other servicers
(payment may
not increase)
Any
amount
Any
amount
Any amount
See Mortgagee
Letter HUD
Handbook 4000.1
Part III. A. 2 re
target payment
Target
payment
31% DTI 10%-55% or 25-
42% DTI (varies
by servicer)
31% DTI 10%-55%
DTI
Depends
Payment
Cap
31% DTI 55% or 42% DTI 31% DTI 55% DTI 40% DTI 8
Principal Reduction & ForbearanceHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-
HAMP
Principal
Reductions
Yes Yes No Limited
program
(Streamlined
mod)
No, just
deferment
Principal
forbearance
caps
Greater of
MTM LTV
100% or 30%
of capitalized
UPB
Lesser of
MTM LTV
115% or 30%
of capitalized
UPB
Greater of
MTM LTV
100% or
30% of
capitalized
UPB
Lesser of MTM
LTV 115% or
30% of
capitalized
UPB
30% of
UPB,
before
default
Borrower pay
for
performance
incentives
Yes, up to
$5,000
No Yes No No
9
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5/24/2016
4
Limits on AbuseHAMP Tier
1
HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-HAMP
Late fees
capitalized?
No No No No No
Caps on
foreclosure fees
capitalized?
No No Yes Yes
($1,800
Freddie Mac)
Yes
($1850)
Waiver of legal
claims?
No No No No ??
Charges for
loan
modification?
No No No No No
10
Enforcement & IncentivesHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-HAMP
Rules
Privately
Enforceable
Probably, see
Wigod
Probably,
following
Wigod
Probably,
following
Wigod
?? Yes, see
Bankers Life v.
Denton
Escalations Internal;
escalations@hmpadmin.com
borrower_outreach@freddie
mac.com
Phone: 1-800-FREDDIE
resource_center@fanniemae.
com
Phone: 1-800-7FANNIE
Internal; NSC
at (877) 622-
8525
Incentives to
Servicers
$800-$2,000, plus
$1,000/year for 3
years
$800-$2,000 $400-$1,600 $400-$1,600 $750 for
executed loan
mod
11
Dual Tracking and ForeclosureHAMP Tier 1 HAMP Tier 2 GSE HAMP GSE Standard
Mod
FHA-HAMP
Evaluation Before
Foreclosure?
Yes Not required Yes Yes Yes
Foreclosure Sale
Suspended If
Application
Received
>7 business days before scheduled
sale
> 37 days
before
scheduled
sale, for 14
days after mod
offered
> 37 days before
scheduled sale,
for 14 days after
mod offered
> 37 days before
scheduled sale
Foreclosure
proceedings
suspended
During trial plan During trial
plan
During trial plan During trial plan
Foreclosure
Proceedings
Terminated
Upon permanent mod? Upon
permanent
mod?
Upon permanent
mod?
Upon permanent
mod
12
61
Copyright 2013 National Consumer Law Center Page 1 of 7
Introduction
The Making Home Affordable Program was announced by the U.S. Department of the Treasury in February 2009 in an effort to help stabilize the housing market and provide relief for struggling homeowners. The Program has two components: the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP). This summary focuses on HAMP. More information about the entire Making Home Affordable Program and HAMP can be found at http://www.nclc.org/issues/loan-modification-programs.html. HAMP was announced on March 4, 2009 to help standardize industry practices regarding mortgage loan modifications. It is is slated to end December 31, 2015. Detailed HAMP guidelines are available at https://www.hmpadmin.com. Lenders, Investors, and Servicers
Distinguishing between lenders, investors, and servicers is crucial. The mortgage lender is the financial institution that originally provided the mortgage. The mortgage note may have since been sold to another investor or a securitized trust. The servicer is the company responsible for collecting mortgage payments and management and accounting of the mortgage. The servicer is usually different from the investor. Servicer Participation in HAMP
Servicers, not investors, participate in HAMP. Servicers’ agreements with investors are contained in pooling and servicing agreements (PSAs). Most PSAs contain no meaningful restrictions on modifying loans in default. If a PSA contains such a restriction, the servicer must make “reasonable efforts” to get the investor to waive this restriction. The majority of servicers have signed a Servicer Participation Agreement (SPA) with the U.S. Department of the Treasury, agreeing to participate in HAMP. All servicers who have agreed to participate are required to review the eligibility of any borrower who asks to be considered for the program. A list of participating servicers is available at http://makinghomeaffordable.gov/contact_servicer.html. Copies of the contracts are available at http://www.treasury.gov/initiatives/financial-stability/housing-programs/mha/Pages/default.aspx. Loans owned by Fannie Mae and Freddie Mac must be modified under their versions of HAMP, whether or not the servicer is otherwise participating in HAMP. Similarly, VA, FHA, and USDA (RHS) loans have their own version of HAMP. When a servicer transfers a mortgage modified under HAMP, the transferee servicer must assume the transferor’s obligations under the SPA, including evaluating loans for HAMP,
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processing HAMP trial modifications, and timely converting trial modifications to permanent modifications.1
Protections Against Foreclosure
Servicers are prohibited from referring a loan to foreclosure or conducting a scheduled sale until the borrower has been evaluated and determined ineligible for HAMP, the borrower has failed to make the required trial plan payments, the borrower has failed to provide the required documents after at least two written requests, or the borrower has failed to respond entirely to the servicer, after the servicer has complied with HAMP’s requirements of reasonable solicitation. Seven days before a foreclosure sale can take place, the servicer must provide its foreclosure counsel with a certification that all HAMP requirements have been complied with. If a borrower requests a HAMP modification seven business days prior to a scheduled foreclosure sale, the servicer must suspend the foreclosure sale while it completes its evaluation of the borrower for HAMP. Similarly, if a borrower has escalated denial of a loan modification seven business days before the scheduled foreclosure sale, the sale must be suspended, pending the resolution of the escalation. Once a borrower is in a trial plan based on verified income, the foreclosure process must be suspended. Basic Program Eligibility
To be eligible for HAMP, borrowers must 1) meet the basic program requirements and 2) pass the Net Present Value (NPV) test, an evaluation to determine whether it is more cost effective to modify the loan or foreclose. Basic Program Requirements Both borrowers who are current on their mortgage and those who are delinquent are eligible for a modification under HAMP. If the borrower is current or less than sixty days delinquent, the borrower must demonstrate that default is imminent. Borrowers must meet the following requirements:
• The loan must have originated before January 1, 2009.
• The monthly mortgage payment ratio must be greater than 31% of the borrower’s monthly gross income.2
• The loan must be secured by a one-to-four unit property which is the borrower’s principal residence. One-to-four unit investment properties are eligible for HAMP Tier 2 modifications, even if the borrower does not reside at the property.
1 Servicers can transfer the Eligible Loan without SPA obligations if one of the circumstances in Section 3.1.1of Chapter 2 of the Making Home Affordable Handbook exists and applicable response periods have elapsed. 2 Monthly gross income is the borrower’s income before any payroll deductions.
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• First lien mortgages must have an unpaid principal balance (prior to capitalization of the arrears) equal to or less than:
o $729,750 for one unit o $934,200 for two units o $1,129,250 for three units o $1,403,400 for four units
• The Property cannot be vacant or condemned.
• The loan cannot have been previously modified under HAMP for HAMP Tier 1 modifications.
• Borrowers must submit a hardship affidavit explaining why they cannot make full mortgage payments.3
• Borrowers must agree to set up an escrow account for taxes and hazard and flood insurance, if one does not already exist.
• Borrowers must certify that they have not been convicted within the last ten years of felony larceny, theft, fraud, forgery, money laundering, or tax evasion in connection with a mortgage or real estate transaction.
Servicers cannot do the following:
• Charge borrowers for the modification.
• Require dead or divorced borrowers on any modification documents. Net Present Value Test
The purpose of the Net Present Value (NPV) test is to determine whether it is more cost effective to modify the loan or foreclose for the owners of the loan. The NPV test compares the net present value of money the investors in the loan would receive if the loan were modified with what would be received if no modification were made. Participating servicers are required to perform a NPV test if a borrower meets the basic eligibility test outlined above. Modifications are “NPV positive” if the investors will get a greater return from modifying the mortgage than not. The servicer must modify the mortgage if it is NPV positive unless there is fraud or a prohibition in the securitization contracts. If prohibited by contract, servicers are required to use reasonable efforts to obtain waivers or approvals from the parties. Modifications are “NPV negative” if the investor is forecast to profit more from proceeding with the foreclosure than from modifying. Servicers may modify under these circumstances, if permitted by investors. Servicers are also required to run an NPV test with principal reduction if the unpaid principal balance of the loan is greater than 115% of the home’s current market value.
3 The affidavit does not have to be notarized.
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Treasury has created a public site, CheckMyNPV.com, to allow homeowners, counselors, and other interested parties to confirm the servicers’ NPV calculation. This tool provides a NPV evaluation estimate using the same formula servicers are required to use and the discount rates of the largest servicers are embedded in the program. Homeowners who receive an NPV denial letter from the servicer will have available the servicers’ inputs to enter. Provided the homeowner uses the inputs provided by the servicer in any NPV denial letter, the only variation could result from investor restrictions; servicers must document their efforts to seek waivers of any investor restrictions. Income Verification
The borrower must provide the required income verification documents to qualify for a HAMP modification. This includes copies of two recent pay stubs for each wage earning borrower, and either IRS Form 4506-T or the most recent tax return, if the borrowers file taxes. Income less than 20% or more of the borrower’s total gross income need not be documented, including income from non-borrower residents, rental income, public benefit income.
Income verification is required for all borrowers on the loan. However, servicers cannot require income verification for dead or divorced borrowers. Affordability Determination
Once the borrower is approved for modification, the terms of the modification are set through a standard modification waterfall. The goal of these steps is to alter the terms of a mortgage to reduce the total mortgage payment, including principal, interest, taxes, insurance, and association fees, to 31% of the monthly gross income of all borrowers on the mortgage. First, the servicer must capitalize any accrued interest, escrow advances to third parties, and servicing advances paid to third parties related to the preservation of the property and enforcement of the mortgage, if allowed by state law. Second, the servicer can reduce the interest rate as low as 2%, fixed for five years. At the end of five years, the payments increase incrementally at one percentage point a year until they reach the level of the prime monthly mortgage survey rate as reported by Freddie Mac the week the loan is evaluated for modification. Third, if the payment is still not affordable, the servicer can extend the amortization of the loan to a maximum of 40 years. Fourth, the servicer can provide for principal forbearance in which a portion of the principal is deferred and no interest accrues on the deferred amount. The forbearance amount is due at the end of the loan term or when the loan is paid off or refinanced. Servicers may also forgive principal before or instead of any of these steps.
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Trial Payment Period
After affordability is determined and before the modification becomes permanent, the borrower must complete a three-month trial payment period in which he or she makes monthly payments based on the proposed new loan terms determined by the standard modification waterfall.4 The borrower must make each trial period payment by the last day of the month in which it is due in order to qualify for a permanent modification. If the trial payment period is successfully completed and the servicer confirms the borrower meets the eligibility criteria, the loan modification becomes permanent on the first day of the month following the trial period. If the servicer fails to provide the homeowner with the necessary documents in a timely fashion, the servicer must still treat the borrower’s account as if the modification had been made permanent in all respects, including the effective interest rate and the interest-bearing principal balance. The borrower need not continue making trial modification payments while waiting for the permanent modification documents. Notice of Denial
If a modification is denied at any stage of the process, servicers are required to provide borrowers with a denial notice and a reason for the denial. The borrower may then correct NPV values if necessary. If a correction is accurate, material, and likely to change the NPV outcome, the servicer must re-run the NPV test using the same test and the same inputs, other than those challenged by the borrower. While the test is being re-run, the foreclosure sale must be suspended. Redefault and Loss of “Good Standing”
If a borrower becomes more than 90 days delinquent, the borrower loses good standing. At that point, no further incentives are paid to the servicer, investor, or borrower and the borrower cannot be reconsidered for a future HAMP Tier 1 modification. However, the servicer is still required to work with the borrower to cure the default and consider other available loss mitigation options before initiating foreclosure. Homeowners who have defaulted on a HAMP Tier 1 modification may be considered for a HAMP Tier 2 modification. However, borrowers who fail to make their first payment under a HAMP Tier 1 trial modification, or borrowers whose servicer miscalculated their income (a common error) with the result that the trial plan overstated the monthly payment by 10%, or borrowers who fail to accept the trial plan for any reason are eligible to reapply for a HAMP Tier 1 modification if they can show a change of circumstances.
4 During this trial period the servicer is required to temporarily suspend the foreclosure process, if it has been initiated, and the servicer may not initiate foreclosure or conduct a sale.
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Borrowers in Bankruptcy
Servicers cannot deny modification because of a borrower’s pending bankruptcy. Borrowers who file for bankruptcy after entering a HAMP trial period plan may not be denied a permanent modification on the basis of a bankruptcy filing. Borrowers who received a chapter 7 discharge and who did not reaffirm the mortgage sought to be modified are eligible, and no reaffirmation of the debt may be required. HAMP Tier 1 vs. HAMP Tier 2 HAMP Tier 2 modifications, unlike standard HAMP Tier 1 modifications, can be made on investment property that does not also serve as the borrower’s residence. HAMP Tier 2 modifications are also available to homeowners who have redefaulted on a HAMP Tier 1 modification, even without a showing of change of circumstances. Borrowers must otherwise meet the basic HAMP eligibility requirements. The HAMP Tier 2 modifications follow a set waterfall, without regard for the affordability of the final payment. For all HAMP Tier 2 modifications, the loan is modified by
o Capitalizing arrears o Adjusting interest rate o Extending term to 480 months o Principal forbearance.
The interest rate is lowered, for all borrowers, to the current Freddie Mac Prime Mortgage Survey Rate plus 50 basis points, rounded to the nearest 1/8th of a percentage point. Similarly, all borrowers whose unpaid principal balance exceeds 115% of the current value of the property will recevie a fixed amount of principal forbearance, based on their loan terms, in a HAMP Tier 2 modification. After the terms of the loan modification are set, it is checked against the Net Present Value test and screened for affordability. Affordability for HAMP Tier 2 modifications is defined as resulting in a debt-to-income ratio between 25% and 42% (in contrast to HAMP Tier 2’s strict insistence on a post-modification debt-to-income ratio of 31%), coupled with a payment reduction, from the pre-modification payments, of 10%. Second Lien Modification Program
Servicers who participate in the Second Lien Modification Program (2MP) must modify second liens they service if the corresponding first lien is modified. The second lien may be either extinguished or modified. If modified, it must be modified following the same steps as required for the first lien modification, with interest reduced to 1%, and the term extended out to the term on the modified first lien. If there is principal forbearance on the the modification of the first lien mortgage, there must be principal forbearance in the same proportion on the second line modification.
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Unemployed Borrowers
A separate program known as the Home Affordable Unemployment Program (UP) exists for unemployed borrowers. If the borrower declines an offer for an UP forbearance plan, the servicer is not required to offer the borrower a modification under HAMP. However, the servicer, at its discretion, may offer to evaluate the borrower for HAMP in accordance with investor guidelines. Upon completion of the three month UP forbearance, the servicer must evaluate the borrower for HAMP. Borrowers who live in a federal disaster area may combine their UP forbearance sequentially with a three month federal disaster forbearance. Program Incentives HAMP provides for the use of government funds to pay servicers for successful loan modifications. If the borrower completes the initial 3-month trial payment period, the servicer may receive $400 to $1,600 per loan modified, depending on delinquent the mortgage was when modified. Servicers are not permitted to require borrowers to pay down any arrearages in order to qualify the loan for higher incentive payments. If the borrower remains in the program and the borrower’s monthly mortgage payment is reduced by 6% or more, the servicer may receive up to $1,000 each year for up to three years. The investor receives a one-time $1,500 bonus if the borrower was current before the loan modification and the borrower’s monthly mortgage payment is reduced by 6% or more, as well as additional subsidies to support the reduction of the payment, protect against further price declines, and support principal reduction. If the borrower remains current on the modified mortgage, he or she will receive $1,000 each year for up to five years towards reducing the principal balance on the mortgage. These payments are made directly to the servicer and are not included in income for federal tax purposes.
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HAMP & LOAN MODIFICATION GLOSSARY
2MP: Second Lien Modification Program. The junior lien component of HAMP.
FHA: Federal Housing Authority.
GSEs: Government sponsored enterprises. These include Fannie Mae and Freddie Mac, who between
them hold most of the prime mortgages in the U.S.
HAFA: Home Affordable Foreclosure Alternatives. The short sale and deed‐in‐lieu companion program
to HAMP.
HAMP: Home Affordable Modification Program. The government’s program to encourage loan
modifications.
MHA: Making Home Affordable. The umbrella name for the Administration’s anti‐foreclosure
programs.
Net Present Value: Measurement of the value of a foreclosure or modification, stated in current dollars.
PSA: Pooling and servicing agreement. The agreement between the servicer, the trustee, and the
investors in the loan pool.
Redefault: When a borrower falls behind on a loan modification.
RHS: Rural Housing Services.
RMA: Request for Modification Agreement.
SSG: The Seller‐Servicer Guide. Compendium of rules for servicers of GSE loans.
TPP: Trial period plan.
VA: Veteran’s Administration.
Waterfall: The order in which various steps are taken to reduce the monthly mortgage payment.
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Current Loan Modification Programs Overview National Consumer Law Center: http://www.nclc.org/issues/foreclosures-and-mortgages.html HAMP General overview: http://financialstability.gov/roadtostability/homeowner.html Borrower information: http://makinghomeaffordable.gov Servicer documents (non-GSE servicers):
http://hmpadmin.com Servicer contracts:
http://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/mha/Pages/contracts.aspx
Fannie Mae overview: https://www.efanniemae.com/sf/mha/index.jsp Freddie Mac overview: http://www.freddiemac.com/singlefamily/makinghomeaffordable.html FHA Mortgagee Letters: hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm VA Information: homeloans.va.gov/valeri.html Escalations
escalations@hmpadmin.com borrower_outreach@freddiemac.com resource_center@fanniemae.com hsg-lossmit@hud.gov
Fannie Mae Loan lookup:
fanniemae.com/loanlookup/ Freddie Mac Loan lookup:
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https://ww3.freddiemac.com/corporate/?intcmp=LLT-HPimage
Streamlined modification program: http://www.freddiemac.com/singlefamily/service/streamlined_modification.html Weekly survey rates: http://www.freddiemac.com Net Present Value Tests FDIC: http://www.fdic.gov/consumers/loans/prevention/NPVCalculator.html HAMP: CheckMyNPV.com National Mortgage Settlement
http://nationalmortgagesettlement.com/ OCC/ FRB/IFR Process
https://independentforeclosurereview.com/ http://www.occ.gov/topics/consumer-protection/foreclosure-prevention/correcting-foreclosure-practices.html http://www.occ.gov/topics/consumer-protection/foreclosure-prevention/ifr-settlement-faqs.html
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UNIFORM BORROWER ASSISTANCE FORM If you are experiencing a temporary or long-term hardship and need help, you must complete and submit this form along with other required documentation to be considered for available solutions. On this page, you must disclose information about (1) you and your intentions to either keep or transition out of your home; (2) the property’s status; (3) bankruptcy; and (4) your credit counseling agency.
On Page 2, you must disclose information about all of your income, expenses and assets. Page 2 also lists the required income documentation that you must submit in support of your request for assistance. Then on Page 3, you must complete the Hardship Affidavit in which you disclose the nature of your hardship. The Hardship Affidavit informs you of the required documentation that you must submit in support of your hardship claim.
NOTICE: In addition, when you sign and date this form, you will make important certifications, representations and agreements, including certifying that all of the information in this Borrower Assistance Form is accurate and truthful and any identified hardship has contributed to your submission of this request for mortgage relief.
REMINDER: The Borrower Response Package you need to return consists of: (1) this completed, signed and dated Borrower Assistance Form; (2) completed and signed IRS Form 4506T-EZ (4506T for self-employed borrowers or borrowers with rental income); (3) required income documentation; and (4) required hardship documentation. Loan Number ψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψ (usually found on your monthly mortgage statement) Servicer’s Name ψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψψ
I want to: Keep the Property Vacate the Property Sell the Property Undecided
The property is currently: My Primary Residence A Second Home An Investment Property
The property is currently: Owner Occupied Renter Occupied Vacant
BORROWER CO-BORROWER BORROWER’S NAME
CO-BORROWER’S NAME
SOCIAL SECURITY NUMBER
DATE OF BIRTH
SOCIAL SECURITY NUMBER
DATE OF BIRTH
HOME PHONE NUMBER WITH AREA CODE
HOME PHONE NUMBER WITH AREA CODE
CELL OR WORK NUMBER WITH AREA CODE
CELL OR WORK NUMBER WITH AREA CODE
MAILING ADDRESS PROPERTY ADDRESS (IF SAME AS MAILING ADDRESS, JUST WRITE SAME)
EMAIL ADDRESS
Is the property listed for sale? Yes No If yes, what was the listing date? ___________ If property has been listed for sale, have you received an offer on the property? Yes No Date of offer: ___________ Amount of Offer: $ _______________ Agent’s Name: ____________________________________________ Agent’s Phone Number: For Sale by Owner? Yes No
Have you contacted a credit counseling agency for help? Yes No If yes, please complete the counselor contact information below: Counselor’s Name: ___________________________________ Agency’s Name: ___________________________________ Counselor’s Phone Number: ____________________________ Counselor’s Email Address: ____________________________
Do you have condominium or homeowner association (HOA) fees? Yes No
Total monthly amount: $ Name and address that fees are paid to:
Have you filed for bankruptcy? Yes No If yes: Chapter 7 Chapter 11 Chapter 12 Chapter 13
If yes, what is the filing Date: __________ Has your bankruptcy been discharged? Yes No Bankruptcy case number: ______________
Is any Borrower an active duty service member? Yes No Has any Borrower been deployed away from his/her primary residence or received a Permanent Change of Station order? Yes No Is any Borrower the surviving spouse of a deceased service member who was on active duty at the time of death? Yes No
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Any other liens (mortgage liens, mechanics liens, tax liens, etc.) Lien Holder’s Name Balance and Interest Rate Loan Number Lien Holder’s Phone Number
Required Income Documentation
Do you earn a salary or hourly wage? For each borrower who is a salaried employee or paid by the hour, include paystub(s) reflecting the most recent 30 days’ earnings and documentation reflecting year-to-date earnings, if not reported on the paystubs (e.g. signed letter or printout from employer).
Are you self-employed? For each borrower who receives self-employed income, include a complete, signed
individual federal income tax return and, as applicable, the business tax return; AND either the most recent signed and dated quarterly or year-to-date profit/loss statement that reflects activity for the most recent three months; OR copies of bank statements for the business account for the last two months evidencing continuation of business activity.
Do you have any additional sources of income? Provide for each borrower as applicable: “Other Earned Income” such as bonuses, commissions, housing allowance, tips, or overtime: Reliable third-party documentation describing the amount and nature of the income (e.g., paystub, employment contract or printouts
documenting tip income). Social Security, disability or death benefits, pension, public assistance, or adoption assistance:
Documentation showing the amount and frequency of the benefits, such as letters, exhibits, disability policy or benefits statement from the provider, and Documentation showing the receipt of payment, such as copies of the two most recent bank statements showing deposit amounts.
Rental income: Copy of the most recent filed federal tax return with all schedules, including Schedule E—Supplement Income and Loss. Rental income for qualifying purposes will be 75% of the gross rent you reported reduced by the monthly debt service on the property, if applicable; or If rental income is not reported on Schedule E – Supplemental Income and Loss, provide a copy of the current lease agreement with either bank statements or cancelled rent checks demonstrating receipt of rent.
Investment income: Copies of the two most recent investment statements or bank statements supporting receipt of this income.
Alimony, child support, or separation maintenance payments as qualifying income:* Copy of divorce decree, separation agreement, or other written legal agreement filed with a court, or court decree that states the amount of the alimony, child support, or separation maintenance payments and the period of time over which the payments will be received, and Copies of your two most recent bank statements or other third-party documents showing receipt of payment.
*Notice: Alimony, child support, or separate maintenance income need not be revealed if you do not choose to have it considered for repaying this loan.
UNIFORM BORROWER ASSISTANCE FORM Monthly Household Income Monthly Household Expenses and Debt
Payments Household Assets (associated with the property and/or borrower(s)excluding
retirement funds) Gross wages
$
First Mortgage Payment
$
Checking Account(s)
$
Overtime $ Second Mortgage Payment $ Checking Account(s)
$
Child Support / Alimony*
$
Homeowner’s Insurance
$
Savings / Money Market
$
Non-taxable social security/SSDI
$
Property Taxes
$
CDs
$
Taxable SS benefits or other monthly
income from annuities or retirement
plans
$
Credit Cards / Installment Loan(s) (total
minimum payment per month)
$
Stocks / Bonds
$
Tips, commissions, bonus and self-
employed income
$
Alimony, child support payments
$
Other Cash on Hand
$
Rents Received
$
Car Lease Payments
$
Other Real Estate (estimated value)
$
Unemployment Income
$
HOA/Condo Fees/Property Maintenance $
Other
$
Food Stamps/Welfare
$
Mortgage Payments on other properties $
$
Other
$
Other
$ $
Total (Gross income)
$
Total Household Expenses and Debt
Payments
$
Total Assets
$
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HARDSHIP AFFIDAVIT I am requesting review of my current financial situation to determine whether I qualify for temporary or permanent mortgage loan relief options. Date Hardship Began is: I believe that my situation is:
Short-term (under 6 months) Medium-term (6 – 12 months) Long-term or Permanent Hardship (greater than 12 months) I am having difficulty making my monthly payment because of reason set forth below: (Please check the primary reason and submit required documentation demonstrating your primary hardship)
If Your Hardship is: Then the Required Hardship Documentation is: Unemployment No hardship documentation required Reduction in Income: a hardship that
has caused a decrease in your income due to circumstances outside your control (e.g., elimination of overtime, reduction in regular working hours, a reduction in base pay)
No hardship documentation required
Increase in Housing Expenses: a hardship that has caused an increase in your housing expenses due to circumstances outside your control
No hardship documentation required
Divorce or legal separation; Separation of Borrowers unrelated by marriage, civil union or similar domestic partnership under applicable law
Divorce decree signed by the court; OR Separation agreement signed by the court; OR Current credit report evidencing divorce, separation, or non-occupying
borrower has a different address; OR Recorded quitclaim deed evidencing that the non-occupying Borrower or co-
Borrower has relinquished all rights to the property Death of a borrower or death of either
the primary or secondary wage earner in the household
Death certificate; OR Obituary or newspaper article reporting the death
Long-term or permanent disability; Serious illness of a borrower/co- borrower or dependent family member
Proof of monthly insurance benefits or government assistance (if applicable); OR Written statement or other documentation verifying disability or illness; OR Doctor’s certificate of illness or disability; OR Medical bills
None of the above shall require providing detailed medical information. Disaster (natural or man-made)
adversely impacting the property or Borrower’s place of employment
Insurance claim; OR Federal Emergency Management Agency grant or Small Business Administration
loan; OR Borrower or Employer property located in a federally declared disaster area
Distant employment transfer / Relocation For active duty service members: Notice of Permanent Change of Station (PCS) or actual PCS orders. For employment transfers/new employment: Copy of signed offer letter or notice from employer showing transfer to a new
employment location; OR Pay stub from new employer; OR If none of these apply, provide written explanation
In addition to the above, documentation that reflects the amount of any relocation assistance provided, if applicable (not required for those with PCS orders).
Business Failure Tax return from the previous year (including all schedules) AND Proof of business failure supported by one of the following:
Bankruptcy filing for the business; OR Two months recent bank statements for the business account evidencing cessation of business activity; OR Most recent signed and dated quarterly or year-to-date profit and loss statement
Other: a hardship that is not covered above
Written explanation describing the details of the hardship and relevant documentation
UNIFORM BORROWER ASSISTANCE FORM
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Borrower/Co-Borrower Acknowledgement and Agreement I certify, acknowledge, and agree to the following:
1. All of the information in this Borrower Assistance Form is truthful and the hardship that I have identified contributed to my need for mortgage relief.
2. The accuracy of my statements may be reviewed by the Servicer, owner or guarantor of my mortgage, their agent(s), or an authorized third party*, and I may be required to provide additional supporting documentation. I will provide all requested documents and will respond timely to all Servicer, or authorized third party*, communications.
3. Knowingly submitting false information may violate Federal and other applicable law. 4. If I have intentionally defaulted on my existing mortgage, engaged in fraud or misrepresented any fact(s) in
connection with this request for mortgage relief or if I do not provide all required documentation, the Servicer may cancel any mortgage relief granted and may pursue foreclosure on my home and/or pursue any available legal remedies.
5. The Servicer is not obligated to offer me assistance based solely on the representations in this document or other documentation submitted in connection with my request.
6. I may be eligible for a trial period plan, repayment plan, or forbearance plan. If I am eligible for one of these plans, I agree that:
a. All the terms of this Acknowledgment and Agreement are incorporated into such plan by reference as if set forth in such plan in full.
b. My first timely payment under the plan will serve as acceptance of the terms set forth in the notice of the plan sent by the Servicer.
c. The Servicer’s acceptance of any payments under the plan will not be a waiver of any acceleration of my loan or foreclosure action that has occurred and will not cure my default unless such payments are sufficient to completely cure my entire default under my loan.
d. Payments due under a trial period plan for a modification will contain escrow amounts. If I was not previously required to pay escrow amounts, and my trial period plan contains escrow amounts, I agree to the establishment of an escrow account and agree that any prior waiver is revoked. Payments due under a repayment plan or forbearance plan may or may not contain escrow amounts. If I was not previously required to pay escrow amounts and my repayment plan or forbearance plan contains escrow amounts, I agree to the establishment of an escrow account and agree that any prior escrow waiver is revoked.
7. A condemnation notice has not been issued for the property. 8. The Servicer or authorized third party* will obtain a current credit report on all borrowers obligated on the
Note. 9. The Servicer or authorized third party* will collect and record personal information that I submit in this
Borrower Response Package and during the evaluation process. This personal information may include, but is not limited to: (a) my name, address, telephone number, (b) my social security number, (c) my credit score, (d) my income, and (e) my payment history and information about my account balances and activity. I understand and consent to the Servicer or authorized third party*, as well as any investor or guarantor (such as Fannie Mae or Freddie Mac), disclosing my personal information and the terms of any relief or foreclosure alternative that I receive to the following:
a. Any investor, insurer, guarantor, or servicer that owns, insures, guarantees, or services my first lien or subordinate lien (if applicable) mortgage loan(s) or any companies that perform support services to them; and
b. The U.S. Department of Treasury, Fannie Mae and Freddie Mac, in conjunction with their responsibilities under the Making Home Affordable program, or any companies that perform support services to them.
10. I consent to being contacted concerning this request for mortgage assistance at any telephone number, including mobile telephone number, or email address I have provided to the Lender/Servicer/ or authorized third party*. By checking this box, I also consent to being contacted by text messaging.
_________________________________ __________ ___________________________ __________ Borrower Signature Date Co-Borrower Signature Date
*An authorized third party may include, but is not limited to, a counseling agency, Housing Finance Agency (HFA) or other similar entity that is assisting me in obtaining a foreclosure prevention alternative.
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Government-Insured Mortgage
Loan Programs
Alabama Foreclosure Training
June 2, 2016
THREE FEDERAL AGENCIES
• HUD – manages FHA single-family insured loan program
• VA – manages VA single-family insured loan program
• USDA – manages two distinct programs:
– USDA insured single-family home loan program
– USDA direct loan program (purchase and home repair loans)
Structural Similarities - Authority
• Federal Statute
• Codified Regulation (C.F.R.)
• Agency Handbook
• Administrative updates (on website)
• Court decisions
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Defense to Foreclosure
• Compliance with regulatory framework as condition precedent to foreclosure
• Enforce regulations to defeat foreclosure
• Enforce loan contract that incorporates regulatory obligations
• Compare Campbell v. Bank of Am., 141 So.3d 492 (Ct. App. Ala. 2013) and Wells Fargo v. Neal, 922 A.2d 538 (Md. 2007) (both addressing FHA equitable defense)
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FHA LOSS MITIGATION
AUTHORITY
• Statute; 12 U.S.C. § 1715u
• HUD Regulations: 24 C.F.R. § 203.500, et seq. and §203.600,
et seq.
• HUD Mortgagee Letters
• New HUD Handbooks 4000.1 (effective March 2016)
• Court Decisions
• HUD/FHA website: http://www.hud.gov/offices/adm/hudclips/
(contains Mortgagee Letters, Handbooks)
The Federal Statute: FHA Loss
Mitigation Review is Mandatory
• The National Housing Act states: Upon
default of any mortgage insured under this title, mortgagees shall engage in loss
mitigation actions for the purpose of
providing an alternative to foreclosure.
• 12 U.S.C. § 1707u(a)
• Obligation is also in the mortgage –enforceable as contract term
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FHA Loss Mitigation Tools
• What loss mitigation techniques must be reviewed under § 203.501 & Handbook 4000.1?– “Special forbearance”
– FHA Standard Modification
– FHA HAMP, including:• Income-based modification and/or
• “Partial Claim” (principal forbearance)
– Pre-foreclosure sale
– Deed in lieu of foreclosure
FHA-HAMP: The Basic Concept
• Combines a partial claim with a loan modification (30-year term, fixed interest rate)
• Uses “partial claim” (principal forbearance) to reach a target payment– Either percentage of income, or– Percentage payment reduction
• The total partial claim (principal forbearance) may not exceed 30 percent of the unpaid principal balance as of the default date.
• No formal NPV test.• New “FHA Loss Mitigation Home Retention Option
Priority Order Waterfall” in HUD Handbook 4000.1 Part III (2016)
FHA National Servicing Center
Oklahoma City Office
U.S. Department of HUD
301 NW 6th Street, Ste 200
Oklahoma City, OK 73102
Fax: (405) 609-8405 or
(405) 609-8421
www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm
E-mail: hsg-lossmit@hud.gov
1-877-622-8525
See also HUD Neighborhood Watch: https://entp.hud.gov/sfnw/public/ (data on FHA loss mitigation activity by state and by servicer)
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RURAL HOUSING LOANS
• U.S.D.A.’s Rural Housing Service (“RHS,” formerly “FmHA”) manages two single-family home loan programs for borrowers in rural areas.– Guaranteed Loan Program: private lender,
guarantee not obvious from mortgage and note
– Direct Loan Program: The United States is the lender and they tell you they are
RHS RESOURCES
Guaranteed Loans:
42 U.S.C. § 1472, et seq.
USDA Regulations: 7 C.F.R. § 1980.301, et seq.
RD Instruction 1980-D (tracks regulations) at http://www.rurdev.usda.gov/regs/
RD Administrative Notice 4433 at http://www.rurdev.usda.gov/regs/
• Includes USDA Rural Development Loss Mitigation Guide (Single Family Guaranteed Loan Program)
– Appendix 4: Loss Mitigation Checklist
– Appendix 5: Loss Mitigation Forms
RHS Guaranteed Loan Program
• RHS Guaranteed Loans: Loss Mitigation
obligation: 42 U.S.C. § 1472(h)(13)
• Options for RHS Guaranteed Loans
– Special Forbearance
– Loan Modifications (including “RHS-HAMP)
– Pre-Foreclosure Sale
– Deed-in-Lieu
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Rural Housing Direct Loans
These are loans directly from the United States government (USDA) to the borrower for
purchase or construction of residence
• “Section 502” loans under U.S. Housing Act
– Regulations: 7 C.F.R. Part 3550
– Handbook HB-2-3550 (Centralized Servicing
Center): http://www.rurdev.usda.gov/regs/hblist.html
RHS Direct Loans
• Direct Loans Special Features:
• Interest credit/payment assistance
reduces monthly payment toward interest
based on household income
• Periodic payment adjustments and review
• Forborne interest is subject to “recapture”
VA Loans - Introduction
• VA guarantees loans by private lenders
• Available for eligible veterans
• Can be for purchase, construction, refinance
• Relatively low interest rate, no down payment
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VA Loans Resources
• Regulations: 38 C.F.R. § 36.4800-4893 & 38 C.F.R. § 4316-19
• VA Handbook H26-94-1
• Servicer Loss Mitigation Program Handbook
• Both handbooks at http://www.homeloans.va.gov/servicers.htm
• Help from regional servicing centers
What are the VA Options?
• Repayment Plan
• Special Forbearance
• Loan Modification
• VA-HAMP
• Compromise (short) sale
• Deed-in-Lieu of foreclosure
• Refinance
• Assumption
• Refunding- VA takes over loan
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©National Consumer Law Center 2013
The CFPB’s Mortgage Servicing
Rules
Alabama Foreclosure Training
June 2, 2016
CFPB Mortgage Servicing Rules
• Dodd-Frank Act of 2010 amended RESPA and TILA to include new servicing requirements
• CFPB issued mortgage servicing regulations in Feb. 2013
• Regulations became effective January 10, 2014 (some revisions underway 2016)
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CFPB Servicing Rules
• Applies to mortgage servicers
– Small servicer exemption (certain provisions)
– Most credit unions, community banks
exempted
• Covers most first lien loans: GSEs,
government insured loans– But not loans securing open-end lines of credit
– Not reverse mortgages
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Notices of Error and Requests for Information
• Separate qualifications and procedures for: – “notice of error” - Reg. X § 1024.35 – “request for information” - Reg. X § 1024.36
• Written inquiry can be a NOE or RFI even if not a former “Qualified Written Request”
• Ban on fees for responding to either a NOE or RFI– § 1024.35(h) – error resolution– § 1024.36(g) – information requests
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Notice of Error12 C.F.R. § 1024.35
Failure to accept a conforming payment
Failure to apply a payment correctly
Failure to timely credit a payment
Failure to make timely escrow disbursements
Imposing an unreasonable fee
Failure to provide a payoff statement
Failure to provide accurate loss
mitigation information
Failure to do a servicing transfer
correctly
Filing a foreclosure without giving the correct notices re.
loss mitigation
Moving for foreclosure judgment
or sale without following the loss
mitigation protocols
Any other error relating to the servicing of a
borrower's mortgage loan
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CFPB Error Resolution Procedures Time Frames
• 5 days to acknowledge receipt
• 30/45 days to respond (reasonable
investigation, report on error correction)
• For errors related to dual tracking
submitted up to 7 days before sale,
servicer must respond before sale. 12 C.F.R. § 1024.35(f)(2)
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Request for Information• Servicer is required to respond to any written
request for information “with respect to the borrower’s mortgage loan”
• Unlike QWR, a RFI is not limited to information “related to the servicing” of the loan
• RFI may seek:– information about a loan modification application
– “servicing file” vs. “mortgage file”
Identity of Mortgage Loan Owner RESPA/TILA
– RESPA Request for Information: Servicer must respond within 10 business days to request for identity, address, and other contact information about owner or assignee of loan. Reg. X §1024.36(d)(2)
– Supplements TILA § 1641(f), but provides time deadline
RFI for Loan Owner
• Who is the current “owner or assignee” of
mortgage loan?
• Generally the beneficial owner – party
ultimately entitled to receive payments
• Guarantor role
• Considering special rule for GSEs.
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Asking the Servicer to Identify the Mortgage Loan Owner
Useful commentary in the RESPA Official Interpretations, § 1024.36(a)-2
TILA - § 1641(f)(2) RESPA - Reg. X § 1024.36(d)(2)
Time Presumptively “reasonable” 10 business days
Fees Not discussed Banned
Remedy $4K plus actual damages,
but servicer liability?
Actual damages, plus
$2K if can prove pattern and practice
Statute of limitations 1 year 3 years
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Loss Mitigation Rules
Rules effective Jan. 10, 2014 dealing with foreclosure avoidance:
• Early Intervention - Reg. X § 1024.39
• Continuity of Contact - Reg. X § 1024.40
• Loss Mitigation - Reg. X § 1024.41
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Jan. 10, 2014 Effective Date
• Does not apply to applications received
before effective date
• Applies to applications received after
effective date even if borrower evaluated for loss mitigation before effective date
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Pre-Foreclosure Review Period
By 36th day of delinquency
Attempt live contact with borrower
By 45th day
Send written notice and assign personnel to borrower
After 120th Day
If complete application not received, may initiate foreclosure by making first notice or filing
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Loss Mitigation Procedures
• CFPB: nothing in § 1024.41 imposes duty on a servicer to provide borrower with a specific loss mitigation option
• Borrowers do not have private right of action under § 1024.41 to enforce terms of agreement between servicer and mortgage holder concerning evaluation for loss mitigation options
• Borrowers do have private right of action to enforce the procedural requirements in §1024.41
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The Loss Mitigation “Application”
• Key concept: the “Application”
• Expansive definition of a loss mitigation
“application”
– May be verbal or in writing
– Borrower must:
• Express interest in foreclosure avoidance
• Provide some information relevant to evaluation for an available option
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Receipt of Application 45 Days or More Before Sale
Servicer must:
• Conduct review to determine whether application is complete
• Within 5 business days of receiving application, provide written notice to borrower that:
• acknowledges application is complete, or
• describes documents and information needed to complete the application, and
• provides “reasonable date” by which borrower should submit missing documents and information
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The “Complete” Application
• When is an application “complete?”
• When servicer “has received all the
information that the servicer requires” to
evaluate for “the loss mitigation options available to the borrower.” (§1024.41(b)(1))
• You need to know how applicable owner/investor guidelines determine the
options “available”
The “Complete” Application
• Servicers have flexibility to establish their own application requirements, but must exercise “reasonable diligence” to obtain information needed to complete the application
• Application is complete if borrower provides all required information within borrower’s control even if additional information not in the control of the borrower is required (e.g., credit report)
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A “Facially Complete Application”
• Means borrower submitted all missing
docs, nothing more due (12 C.F.R. 1024.41(c)(iv))
• Servicer may later request more docs, but borrower retains all protections re: notices,
dual tracking, appeals
“Incomplete Application”
• Servicer has duty to assist in completion
• Must give 5-day notice of:
– What is needed to complete the application
– Deadline for completion
What Happens When the Servicer Gets a “Complete” Application?
• Upon receipt of “complete” application
• Servicer must “evaluate”
• For all “available” options– Not just the ones borrower asked about
• Written notice of decision in 30 days– Describe options being offered
– Specific reason for denial of each available loan modification option
– Notice of right to appeal (escalate)
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CFPB Dual Tracking Restrictions
Two stages
120 day pre-foreclosure review
period
Period from initiation of
foreclosure to sale
CFPB: Dual Tracking Restrictions Before Initiation of Foreclosure
• Runs 120 days from start of delinquency
• Bars “first notice” to start foreclosure
• Insulation from foreclosure activity
• Emphasis on soliciting application (“early
intervention” notice)
• Pre-emption of state foreclosure laws
CFPB: Dual Tracking Restrictions After Initiation of Foreclosure
• Duty to evaluate and give written notice of
decision for complete application submitted up to 37 days before sale date
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Date of Foreclosure Sale
• If no foreclosure sale has been scheduled as of date complete loss mitigation application is received, the application is considered to be received more than 90 days before any foreclosure sale
• Dual track and other protections that apply based on timelines remain in effect even if foreclosure sale is later scheduled or rescheduled
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Summary: Loss Mitigation Application Received . . .
120 days of delinquency
Full evaluation, notice of incomplete application, and appeal rights
No referral to foreclosure
90 days or more before sale
Full evaluation, notice of incomplete application, and appeal rights
No foreclosure sale until application reviewed
45 days or more before sale
Full evaluation and notice of incomplete application
No foreclosure sale until application reviewed
38 days before sale
Full evaluation
No foreclosure sale until application reviewed
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Evaluation of Incomplete Loss Mitigation Application
Servicer may offer:
• A short-term payment forbearance (for payments due over no more than 6 months)
• Other loss mitigation option if application remains incomplete for a significant period of time
If forbearance provided,
servicer must:
• Not initiate or continue with foreclosure if borrower is performing under agreement
• Continue to comply with loss mitigation rule and seek documents to complete application and review if later becomes complete
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Loan Modification Denial
• If loan modification denial based on a requirement set by loan owner or assignee, notice must identify owner or assignee and specific requirement that was basis for denial
• If loan modification denial based on net present value test, notice must state this reason and include the inputs used for the calculation
• Denial notice must also describe borrower’s right to appeal, the deadline to appeal, and any requirements for making an appeal, if applicable
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Loss Mitigation ProcessAppeal Rights
• Appeal rights apply only to decisions:– involving eligibility for loan modifications– made on complete (or facially complete) applications
submitted 90 days or more before a scheduled foreclosure sale
• Borrower must request an appeal within 14 days after servicer provides initial notice of determination
• Review must be by “different personnel than those responsible for evaluating” application
• Servicer must decide appeal and provide notice of determination to borrower within 30 days of appeal request
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Four Basic Notices Required by Rules
Initial pre-foreclosure notice (w/in 45 days of delinquency)
Notice of acknowledgement of receipt of application (5 days from receipt)
• Both for complete and incomplete application
Notice of decision on application & appeal rights (30 days after complete app. received)
Notice of appeal decision
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Transfer Requirements
• New servicer must obtain loss mitigation documents and information submitted by borrower to former servicer and comply with § 1024.41
• If borrower’s complete application is being evaluated when mortgage is transferred, new servicer should “continue the evaluation to the extent practicable”
• Documents in a complete application are received for purposes of timelines as of date they were received by former servicer, not new servicer
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“Duplicative” Applications• Section 1024.41(i): “A servicer is only required to comply
with the requirements of this section for a single complete loss mitigation application for a borrower’s mortgage loan account”
• Does this really mean borrowers have only “one bite at the apple,” regardless of when earlier application was submitted or whether there have been changed circumstances?
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What Must Still Be Done for “Duplicative” Applications
• Rule does not apply if:
– Application is made to a different servicer –comment 41(i) states that transferee servicer
must comply (but does this include transfers between affiliates or through merger?)
– Servicer provides short-term forbearance or
other loss mitigation option on an incomplete application
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Pending Revisions
• Possible revision of § 1024.41(i) “duplicate
application” limitation
• Borrower may be able to submit more loss
mitigation application and receive RESPA procedural protections if not delinquent at
all times since last application
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Servicers’ Duties under TILA –Regulation Z
• Promptly Credit Payments
• Provide Periodic Mortgage Statements
• Provide Payoff Statements
• Provide Payment Change Notices
• Provide Transfer of Ownership Notices
• 12 C.F.R. §§ 1026.20, 1026.36, 1024.41
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Periodic Statements
• Servicer must send statement for each billing cycle with the following categories of information:– amount due for the billing period
– explanation of amount due including fees imposed
– past payment breakdown
– transaction activity
– partial payment information– contact and account information, and
– delinquency information, if applicable
• Disclosure required of payments servicer decides to hold in suspense account rather than apply to account
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Periodic Statements When Homeowner Is
> 45 Days Late
Date consumer became delinquent;
Notification of possible risks, such as foreclosure, and expenses, if delinquency is not cured;
Account history for previous six months or since last time account was current, showing the amount remaining past due from each billing cycle;
Notice of any loss mitigation program to which the consumer has agreed;
Notice of whether the servicer has initiated foreclosure by making the first notice or filing required by state law;
Total payment amount needed to bring the account current; and
Either the CFPB list or the HUD list of homeownership counseling organizations and the HUD toll-free telephone number
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©National Consumer Law Center 2016
Getting Loan Mods for
Successors In Interest
Alabama Foreclosure Training
June 2, 2016
What we’ll talk about
• Assumptions– May the client assume the mortgage?
• Special rules – HAMP
– Freddie & Fannie
– FHA
– CFPB current and proposed rules
• Litigation theories and case law update
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Is your client on the note?
• “Mortgage” = promissory note + mortgage
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Promissory Note
I promise to pay $100,000 at 6% interest.
I will making monthly payments of principal and
interest beginning December 1, 2014.
Any remaining principal shall be due November 1, 2044.
Mortgage
“Borrower” is John Doe“Lender” is Main Street Bank.
This Security Instrument secures to Lender (i) the
repayment of the Loan, and (ii) the performance of Borrower’s
covenants and agreements under the Note and this
Instrument.
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Quick Tips re Absent Co-Borrowers
(Your client is a co-borrower on the note, but another co-borrower is absent.)
Applicable
Rules
Citation for excusing participation/signature
of an absent co-borrower
Freddie Mac Freddie Mac Servicing Guide, Chapter C65.7
Fannie Mae Fannie Mae Servicing Guide §§ D2-2-05; F-1-
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HAMP Making Home Affordable Handbook Version
4.4, Ch. II, §§1.2, 5.7
FHA Mortgagee Letter 2009-23, Attachment
(Eligibility: Mortgagors)4
Does your client own the home?
Deed
George Smith (“grantor”), hereby conveys to Gerald Oster and Olivia Johnson, as joint
tenants with right of survivorship (“grantees”), the property at:
All that tract or parcel of land lying and being in
Land Lot 235, District 13, Lot B, as shown in the plat recorded at…
DeedGeorge Smith (“grantor”), hereby conveys to Gerald and Olivia Johnson, as Husband and
Wife (“grantees”), the property at:
All that tract or parcel of land lying and being…
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Does your client own the home?
• Your client is a joint tenant on a right of survivorship deed
• Your client inherited through a will or through intestate law and has completed any required probate process
• Your client is the remaining beneficiary of an inter vivos trust
• Your client was awarded the home in a divorce decree or property settlement agreement
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Right to Information: CFPB Reg
• 12 CFR 1024.38(b)(1)(vi)
“A servicer shall maintain policies and procedures… reasonably designed to…
(iv) Upon notification of the death of a borrower, promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan.”
• This section of RESPA not privately enforceable… but send a Notice of Error!
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CFPB Reg and Bulletin
• CFPB Bulletin 2013-12 (Oct. 15, 2013) explains how servicers can comply with the Reg:
• Servicers must let successors in interest know what documents they need to provide for communication & assumption
• These docs must be reasonable
• Servicers must let successors in interest know what their options are
• Servicers must develop policies for suspending foreclosure and processing assumption and loan modifications simultaneously
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What’s an assumption?
• Subjects client to personal liability on the
note
• Gives clients all rights of a borrower
• Does not relieve original homeowner of
personal liability unless creditor agrees
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Starting Point: The Client gets to decide
whether or not to assume the mortgage
• Not the servicer; not the mortgagee• Olson v. Etheride, 686 N.E.2d 563 (Ill. 1997) (contracting
parties can modify who has primary responsibility for payment of a debt, without reference to the wishes of the creditor of that debt)
• Andrews v. Holloway, 140 Ga. App. 622, 623 (1976) (under Georgia law, mortgages are freely assignable and assumable and “the lack of consent is immaterial.”)
• Restatement 2nd of Contracts § 323 Comment a (“The assent of the obligor is not ordinarily necessary to make an assignment valid.”)
• See generally Restatement 3rd of Property (Mortgages), §§ 5.1, 5.2 (transfers with and without assumption of liability)
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State contract law: mortgages are
freely assumable unless:
• Contract for personal services
• Against public policy
• Restriction in the contract
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Due-on-Sale Clauses
• Permit the mortgagee to cancel the mortgage contract and call the loan if the property is
transferred
• This is the method creditors use to restrict a transferee’s right to assume the loan
– See Restatement 3rd of Property, §§ 5.1, 5.2
• No due-on-sale clause = no right to foreclose when the property is transferred
– Coffing v. Taylor, 16 Ill. 457 (1855)
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Example
“If all or any part of the Property or any
interest in the Property is sold or transferred (or if Borrower is not a natural
person and a beneficial interest in
Borrower is sold or transferred) without Lender’s prior written consent, Lender may
require immediate payment in full of all
sums secured by the Security Instrument.”
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Garn-St Germain Depository Institutions Act
• Garn-St. Germain Depository Institutions Act at 12 U.S.C. § 1701j-3 et seq (1982)
• Pre-empts state laws that formerly protected homeowners against bank’s oppressive use of due-on-sale clauses:
“Notwithstanding any provision of the constitution or laws (including the judicial decisions) of any State to the contrary, a lender may … enter into or enforce a contract containing a due-on-sale clause with respect to a real property loan.”
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Silver Lining: Exceptions to Garn
• A due-on-sale clause cannot be enforced when an interest in real property is transferred:� Via devise, descent, or operation of law upon the
death of a joint tenant or TBE� To a relative resulting from death of borrower� To a spouse or child of the borrower
� To a spouse pursuant to a divorce decree or separation agreement
� And others. See 12 USC § 1701j-3(d); 12 CFR §191.5(b)(1).
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The Loan is “Assumable”
• See legislative history of Garn
• Congress repeatedly referred to loans with enforceable DOS clauses as “not assumable” and to loans without enforceable DOS clauses as “assumable.”– See S. REP. NO. 97-536, at 25 (1982), as reprinted in 1982
U.S.C.C.A.N. 3054, 3074–79.
• You can’t use a due-on-sale clause to refuse to honor an assumption that is in one of the protected classes
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Helpful Language in the Note and/or Mortgage
• “Any person who takes over these obligations. . . is also obligated to keep all of the promises made under the Note.”
• “The covenants and agreements of this Security Instrument shall bind and benefit the successors and assigns of Lender and Borrower, subject to the provisions of paragraph 17.”
• Read the note and security deed with a highlighter!
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How Do You Get An Assumption?
• No necessary formal words
– “Any words indicating the transferee’s intent to undertake
personal liability for the obligation will suffice.” Carpenter
v. United States, 69 Fed. Cl. 718, 725 (U.S. Claims 2006)
– Restatement 3rd of Property, Mortgages, 5.1
• Signing a loan modification can show assumption
– Chicago Assets Co. v. Watrous, 262 Ill.App. 254 (1st Dist.
1931)
• Best if you can point to a specific communication saying “I
hereby assume and promise to pay this debt.”
– Brush v. Wells Fargo Bank, N.A., 911 F.Supp.2d 445, 459-
462 (S.D. Tex. 2013)
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LOAN MOD PROGRAM RULES FOR SUCCESSORS
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Which Rules Apply?
• FHA insured (HUD mortgagee letters)
– FHA loan # on monthly statements and on the mortgage
• Fannie Mae owned (Fannie Servicing Guide)
– https://knowyouroptions.com/loanlookup
• Freddie Mac owned (Freddie Servicing Guide)
– https://ww3.freddiemac.com/loanlookup/
• HAMP participating servicer (Treasury’s MHA Handbook)
– http://www.makinghomeaffordable.gov/get-started/contact-mortgage/Pages/default.aspx
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HAMP Rules
• Non-borrowers who inherit or are awarded sole title following a death or divorce may apply for a HAMP mod; “servicers should collect an initial package from the non-borrower who now owns the property” and evaluate it “as if he or she was the borrower.” (MHA Handbook, Ch II, Sec. 8.8)
• Simultaneous assumption and modification IF “applicable law” and “investor guidelines” permit assumption (8.8)
• Surviving homeowner remains eligible for new TPP, even if gets booted out of an existing TPP; servicer must stay foreclosure for non-borrower while assumption process chugs forward (8.9.2)
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Fannie Mae
• References “exempt” transactions—basically the Garn-St Germain exceptions
• Requires communication with new owners in exempt transactions
• Loan mod requests for new owners in exempt transactions have to be evaluated as if they came from borrowers (for all available options)
• See Fannie Mae Lender Letter LL-2013-04, and Fannie Mae Servicing Guide Announcement SVC-2013-17; Fannie Guide D1-4.1-02
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Freddie Mac
• Provides for simultaneous modification (HAMP or Standard Mod) and assumptions after a transfer of ownership covered under Sec. 8406 (Garn-exempt transfers)– Sec. 9207.2 in the Freddie Mac Guide– Freddie Mac Bulletin 2013-3 (Feb. 15, 2013)
• Potential issues:– Previously divorce was not clearly covered; this is
no longer an issue! – Language not entirely clear that assumption can’t
involve credit screening, but simultaneous modification and assumption suggests that successor would only need to qualify for the mod
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FHA rulesNew Servicing Handbook, released June 24, 2015:
Non-Borrowers who Acquired Title through an Exempted Transfer
The Mortgagee may consider for Home Retention Options a non-borrower wo acquires title to a Property… if the mortgage is not due and payable pursuant to the Garn-St. Germain Act, and the non-borrower:
• Will occupy the home as a Principal Residence
• Submits to a credit review• Meets financial criteria for loss mitigation assistance; and
• Is willing to assume personal liability for the mortgage in accordance with the agreed loss mitigation terms
Handbook Section III. A. 2. j. ii (B) (4), page 544
See also Wells Fargo Bank v. Curley, 13-CV-7333, Franklin County Court of Common Pleas (Feb. 10, 2015) (heir is a “mortgagor”).
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CFPB Regs
• Tell the servicer in writing that your client is
the successor owner of the home
• Request information about the loan and
available loss mitigation options
• Cite 12 CFR § 1024.38(b)(1)(vi); CFPB
Bulletin 2013-12 (Oct. 15, 2013)
(Proposed rules are much more detailed and include private right of action, but not yet final.)
Servicer Noncompliance• Send a Notice of Error under RESPA, 12 CFR
§ 1024.35.
– Set up a private right of action for servicer’s failure to correct the error
– Actual damages, costs, attorney’s fees
– Statutory damages if pattern and practice
• Tell the CFPB!
– Send an email to: CFPB_servicingrules@cfpb.gov.
– File a complaint: www.consumerfinance.gov
• HAMP Solutions Center or GSE escalation
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Can your client bring a claim under RESPA?
Did client sign the mortgage/deed of trust?
• “Borrower” is not defined in RESPA and Reg. X
• “Borrower” is defined in the Uniform Security Instrument in the
definition section as follows:(B) “Borrower” is
__________________________________________________________. Borrower is the grantor under this Security Instrument.
• The signature line in the Security Instrument refers to the
person signing as the “borrower.”
• Paragraph 1 of the Security Instrument obligates the
borrower/grantor to make payments under the note
• Paragraph 13 states borrower/grantor who does not also sign note is not personally obligated to make payments, but a
default still results in the loss of the grantor’s property interest.
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Can your client bring a claim under RESPA?
• Washington v. Am. Home Loans, 2011 WL 11651320, at *2 (C.D. Cal. Nov. 12, 2011) (signatory of deed of trust has standing to bring a RESPA claim)
• Barzelis v. Flagstar Bank, F.S.B., __ F.3d __, 2015 WL 1849650 (5th Cir. Apr. 22, 2015) (spouse not obligated on the promissory note, by virtue of the state’s community property laws, could pursue a RESPA claim)
• Has client assumed the note? – See Brush v. Wells Fargo Bank, N.A., 911 F.Supp.2d 445 (S.D.
Tex. 2012) (explaining contractual right to assume a mortgage)
• Is client the representative of the estate? – See Kralovic v. JP Morgan Chase Bank, N.A., 2015 WL 252315
(N.D. Ohio Jan. 20, 2015); Wilson v. Bank of America, 48 F.Supp.3d 787 (E.D. Pa. Sept. 24, 2014).
Possible Legal Claims
– Breach of contract
– Breach of duty of good faith and fair dealing
– Promissory estoppel
– Negligence
– UDAP (but exception for regulated areas?)
– FDCPA
– RESPA – failure to respond to NOE
– Court’s equitable powers
– Lack of good faith in settlement conferences/mediation program
– State-specific laws29
Discrimination Claims
• FHA and ECOA
• Protected class:
– Women?
– Elderly?
• Disparate impact vs. disparate treatment
• Getting data
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Good case law• Brush v. Wells Fargo Bank, N.A., 911 F.Supp.2d
445, 459-462 (S.D. Tex. 2013) (successor had the right to assume the mortgage, and had in fact assumed by signing loan mod agreement)
• McGarvey v. JPMorgan Chase Bank, N.A., 2013 WL 5597148 (E.D. Cal. Oct. 11, 2013) (allowing claims for negligence and unfair and deceptive practices to proceed where mortgage servicer led successor to believe she would be approved for a loan modification)
• Wilson v. BOA, 2014 WL 4744555 (E.D. Pa. 2014) (RESPA, UDAP, breach of contract TPP)
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Servicer-specific Info• Citi took forever to implement the rules requiring mod +
assumption for successors. Just recently got it set up. Be sure that your client is compensated for the cost (accrued interest) of any delay.
• At last check, Chase – Had a bizarre, two-phase review process for successors, and– only reviewed successors for proprietary mods w/o a trial plan
b/c it takes the position that it can’t collect trial plan payments from non-borrowers. (Fannie has waived TPP; Problem for Freddie and FHA loans)
• Nationstar seems to have little to no infrastructure to address the successor situation.
• Wells periodically refuses to speak with third parties authorized by a successor.
• Note re: successors and Hardest Hit Fund programs
The Bankruptcy Option
• Basic principle in bankruptcy that a “claim” includes a debt secured by the debtor’s home, even if debtor has no personal liability on the note.
• Non-borrowers that are protected under GSG must be allowed to de-accelerate the note and cure arrearage in a chaper 13 plan. – See In Re Jordan, 199 B.R. 68 (Bankr. S.D. Fla. 1996); In Re
Curinton, 300 B.R. 78 (M.D. Fla 2003); Citicorp Mortg. v. Lumpkin, 144 B.R. 240 (Bankr. D. Conn. 1992); In Re Alexander, 20 Fla. L. Weekly Fed. B 463 (Bankr. N.D. Fla. 2007); see also Johnson v. Home State Bank, 501 U.S. 78 (1991).
• Servicer required by bankruptcy court to engage with GSG-protected debtor in bankruptcy loss mitigation procedures, even though bankruptcy debtor was not on the note and mortgage. In Re Smith, 469 B.R. 198 (Bankr. S.D. N.Y. 2012).
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DeKalb County, Georgia August 19, 2013
Loan Assumption Agreement and Notice
Ocwen Loan Servicing, LLC on behalf of U.S. Bank National Association, as Trustee for the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-RP2 Re: Mortgage Loan # XXXXX1234 Property Address: 1234 Stonecrest Drive, Stone Mountain, Georgia 30083 Mortgagors: John and Jane Doe Original Borrower: John Doe Original Loan Amount: $104,500 Loan Date: April 28, 2000 Security Deed recorded at Deed Book 1234, Page 111, DeKalb County, Georgia, and assigned at Deed Book 2345, Page 222, DeKalb County, Georgia I obtained an undivided one-half interest in the property at 1234 Stonecrest Drive, Stone Mountain, Georgia (“the Property”) when my late husband John Doe and I purchased it on September 14, 1998. We owned the Property as joint tenants with right of survivorship, pursuant to a warranty deed dated September 14, 1998, recorded at Deed Book 1212, Page 112, DeKalb County, Georgia. On October 8, 2008, my husband John Doe died, and I became the successor in interest to his one-half interest in the Property. The Property is subject to a mortgage loan comprised of a note and security deed executed April 28, 2000. I am hereby memorializing my promise to pay this debt. I hereby assume the note. I ratify and affirm the note and specifically assume and agree to pay the debt memorialized in the note and secured by the above-referenced security deed. I agree to be bound by all of the terms, provisions and obligations contained in the note and security deed. Nothing herein contained shall be construed as releasing the original borrower, John Doe, from any liability or obligation under the aforesaid note or security deed. In witness whereof, I have executed this Loan Assumption Agreement and Notice, this 19th day of August, 2013. ________________________ Jane Doe Sworn to and subscribed before me this day of ____________, 2013 ________________________________ NOTARY PUBLIC My Commission Expires:
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1700 G Street, N.W., Washington, DC 20552
CFPB Bulletin 2013-12
Date: October 15, 2013
Subject: Implementation Guidance for Certain Mortgage Servicing Rules
The Consumer Financial Protection Bureau (CFPB) is issuing this bulletin to provide guidance in implementing certain of the 2013 Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) Servicing Final Rules.1 The CFPB issued the 2013 RESPA and TILA Final Rules in January 2013 and they take effect on January 10, 2014. This bulletin provides guidance regarding:
1. Policies and procedures servicers must maintain regarding the identification
of and communication with any successor in interest of a deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan.2
2. Communication with borrowers under the Early Intervention Rule.3
3. Servicers’ obligation to provide certain notices/communications to borrowers who have exercised their right under the Fair Debt Collection Practices Act (FDCPA)4 barring debt collectors from communicating with them.5
1. Policies and Procedures Regarding Successors in Interest to the Property of a
Deceased Borrower In response to inquiries it has received, the CFPB is issuing guidance regarding the policies and procedures servicers of mortgage loans must have in place to comply with requirements
1 78 FR 10695 (Feb. 14, 2013) (RESPA Servicing Final Rule); 78 FR 10901 (Feb. 14, 2013) (TILA Servicing Final Rule), collectively the 2013 RESPA and TILA Servicing Final Rules. Regulations X and Z implement RESPA and TILA, respectively. RESPA and Regulation X generally refer to “borrowers” and TILA and Regulation Z to “consumers;” for simplicity those terms are used interchangeably in this bulletin. 2 12 CFR 1024.38(b)(1)(vi), as published in 78 FR 10695 (Feb. 14, 2013). 3 12 CFR 1024.39, as published in 78 FR 10695 (Feb. 14, 2013). 4 15 U.S.C. 1692 et seq. 5 Section 805(c) of the FDCPA prohibits a debt collector from most communications with a consumer regarding the debt at issue, if the consumer has sent a “cease communication” request. 15 U.S.C. 1692c(c).
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in the Policies and Procedures Rule regarding successors in interest.6 Starting on January 10, 2014, a servicer must have policies and procedures reasonably designed to ensure that, upon notification of the death of a borrower, the servicer promptly identifies and facilitates communication with a successor in interest7 of the deceased borrower with respect to the property that secures the deceased borrower’s mortgage loan. In issuing this guidance, the CFPB seeks both to assist servicers in implementing these policies and procedures and to promote home retention whenever possible for successors in interest faced with the loss of their homes due to the death of a borrower.
The CFPB adopted the successor in interest provision of the Policies and Procedures Rule after learning about difficulties that some surviving spouses, children, or other successors in interest experienced in attempting to communicate with servicers.8 The CFPB has received reports of servicers either outright refusing to speak to a successor in interest or demanding documents to prove the successor in interest’s claim to the property that either do not exist (e.g., probate court documents for an estate that is not required to go through probate) or are not reasonably available. These practices often prevent a successor in interest from pursuing assumption of the mortgage loan and, if applicable, loss mitigation options—potentially resulting in the avoidable loss of the home. In applying the Policies and Procedures Rule, the CFPB seeks to reduce the number of unnecessary defaults and foreclosures, including those following the death of a borrower. The following are examples of servicer practices the CFPB would consider to be components of policies and procedures that are reasonably designed to achieve the objectives of the successor in interest provision:
Promptly providing to any party claiming to be a successor in interest a list of all documents or other evidence the servicer requires, which should be reasonable in light of the laws of the relevant jurisdiction, for the party to establish (1) the death of the borrower and (2) the identity and legal interest of the successor in interest. Such documents might include, for example, a death certificate, an executed will, or a court order determining a succession to real property.
Upon notification of the death of a borrower, promptly identifying and evaluating any issues that the servicer must consider in reviewing the rights and obligations of successors in interest with respect to the property and mortgage loan, including, for example:
o Receipt of acceptable proof of the successor in interest’s identity and legal interest in the property.9
6 12 CFR 1024.38(b)(1)(vi), as published in 78 FR 10695 (Feb. 14, 2013). 7 A successor in interest is the spouse, child, or heir of a deceased borrower or other party with an interest in the property. 8 While the CFPB recognizes that some of these experiences involved reverse mortgages, which are exempt from the requirements of the Policies and Procedures Rule, others involved mortgage loans that will be subject to the rule when it goes into effect. See 12 CFR 1024.30(b)(2), as published in 78 FR 10695 (Feb. 14, 2013). 9 The servicer may be subject to specific investor requirements with respect to the successor in interest’s rights and obligations. For example, a February 2013 bulletin from Freddie Mac requires servicers to refer to it any case “where the servicer is unsure as to whether a purported transferee has a legal or beneficial interest in the
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o Standing of the mortgage loan as current or delinquent.
o Eligibility of the successor in interest to continue making payments on the mortgage loan.
o Whether a trial modification or other loss mitigation option was in place at the time of the borrower’s death.
o Whether there is a pending or planned foreclosure proceeding.
o Eligibility of the successor in interest for loss mitigation options.
o Eligibility of the successor in interest to assume the mortgage loan, with or without a simultaneous loan modification or other loss mitigation option.
Promptly providing successors in interest with information about the above issues, including any servicer prerequisites for the successor in interest to: continue payment on the mortgage loan, assume the mortgage loan, and, where appropriate, qualify for available loss mitigation options.
Promptly providing successors in interest with any documents, forms, or other materials the servicer requires for the successor in interest to continue making payments and to apply and be evaluated for an assumption and, where appropriate, loss mitigation options.
Upon receipt from the successor in interest of required documents, forms or other materials, promptly evaluating the successor in interest for and, where appropriate, implementing options set forth above.
Providing employees with information and training regarding the effect of laws and investor and other requirements on the servicer’s obligations following the death of a borrower, and complying with those laws and requirements, including:
o Servicing guidelines, such as those published by Fannie Mae and Freddie Mac,10
property, but that person is willing to assume the Mortgage obligation.” Freddie Mac Bulletin No. 2013-3 (Feb. 15, 2013), available at http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1303. pdf (“Freddie Mac Bulletin”). 10 For example, in February 2013, Fannie Mae published guidance requiring servicers to “to allow the new owner to continue making mortgage payments and pursue an assumption of the mortgage loan as well as a foreclosure prevention alternative, if applicable.” Where a successor in interest cannot bring the loan current without a foreclosure prevention alternative, including a loan modification, the guidance states that “the servicer must collect a Borrower Response Package from the new property owner and evaluate the request as if they were a borrower.” Fannie Mae, Lender Letter LL-2013-04 (Feb. 27, 2013), available at https://www.fanniemae.com/ content/announcement/ll1304.pdf. See also Fannie Mae, Servicing Guide Announcement SVC-2013-17 (Aug. 28, 2013) available at https://www.fanniemae.com/content/announcement/svc1317.pdf. Also in February 2013, Freddie Mac published guidance requiring servicers to follow similar procedures regarding assumptions and loss mitigation options for successors in interest. See n.27. Both Fannie Mae and Freddie Mac require servicers to submit recommendations to them for approval of a simultaneous mortgage assumption and loss mitigation option.
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o The Garn-St. Germain Act of 1982,11 which imposes certain limits on the application of due-on-sale clauses when real property is transferred as a result of the death of a borrower, and
o Federal or State law restricting the disclosure of the deceased borrower’s non-public personal information.
In addition to the above, servicers should consider whether best practices with regard to their policies and procedures regarding successors in interest would include the following:
Upon notification of the death of a borrower, promptly evaluating whether to postpone or withdraw any pending or planned foreclosure proceeding to provide a successor in interest with reasonable time to establish ownership rights and pursue assumption and, if applicable, loss mitigation options.
Promptly providing a successor in interest with information about the possible
consequences of assuming the mortgage loan, such as any costs and the fact that a later loss mitigation option is not guaranteed if the successor in interest assumes the loan without a loss mitigation option already in place or arranged to commence simultaneous with the assumption.
2. Communications with Borrowers under the Early Intervention Rule
The CFPB is issuing guidance to clarify how a servicer may comply with the requirements in the Early Intervention Rule to make good faith efforts to establish live contact with a borrower.12 For purposes of the Early Intervention Rule, “[d]elinquency begins on the day a payment sufficient to cover principal, interest, and, if applicable, escrow for a given billing cycle is due and unpaid.”13 Thus, once the rule goes into effect, for each billing cycle for which a borrower is delinquent for at least 36 days, servicers are required to make good faith efforts to establish live contact with the borrower by the 36th day and, if appropriate, to inform the borrower about the availability of loss mitigation options.14 Commentary to the Early Intervention Rule states that good faith efforts to establish live contact consist of “reasonable steps under the circumstances to reach a borrower and may include telephoning the borrower on more than one occasion or sending written or electronic communication encouraging the borrower to establish live contact with the servicer.”15 The CFPB emphasizes that the rule is specifically designed to give servicers significant flexibility in tailoring their contact methods to particular circumstances. For delinquencies that begin
11 12 U.S.C. 1701j-3(d)(3). 12 12 CFR 1024.39, as published in 78 FR 10695 (Feb. 14, 2013). 13 12 CFR 1024.39, Supplement I to Part 1024—Official Bureau Interpretations, Comment 39(a)-1, as published in 78 FR 10695 (Feb. 14, 2013). Note that this interpretation of delinquency is particular to the Early Intervention Rule and the Continuity of Contact Rule. Id. at 1024.40 and Comment 1024.40(a)-3. 14 The Early Intervention Rule also requires that a written notice be sent to the borrower not later than the 45th day of delinquency, unless the borrower has submitted payment in the meantime. However, in contrast to the live contact rule, the written notice is required no more than once during any 180-day period. Thus, written notice provided to a borrower pursuant to the rule need not be provided again for 180 days, even if another delinquency occurs and the 45th day after that delinquency falls within the 180-day timeframe. 15 12 CFR 1024.39, Supplement I to Part 1024—Official Bureau Interpretations, Comment 39(a)-2, as published in 78 FR 10695 (Feb. 14, 2013).
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on or after January 10, 2014,16 the CFPB would consider the following communications reasonable steps under the circumstances to establish live contact:
Borrower working with servicer to obtain loss mitigation: The live contact requirement is satisfied with regard to cases in which a borrower is delinquent in consecutive billing cycles if the servicer has established and is maintaining ongoing contact with the borrower with regard to the borrower’s completion of a loss mitigation application and the servicer’s evaluation of that borrower for loss mitigation options.
Borrower stops paying under a loss mitigation plan or becomes delinquent after curing a prior default: As specified in the commentary to the final rule, a borrower is not delinquent under the rule if “performing as agreed under a loss mitigation option designed to bring the borrower current on a previously missed payment . . . .”17 This includes forbearance plans and trial modifications. However, if the borrower fails to make a loss mitigation payment, a new delinquency begins and the servicer has an obligation to make good faith efforts to contact the borrower within 36 days of the start of the delinquency— and for each of any subsequent billing periods for which the borrower’s obligation is due and unpaid. Similarly, if a borrower successfully cures a prior default but becomes delinquent again, the servicer has an obligation to make good faith efforts to contact the borrower within 36 days for each of the subsequent billing periods for which the borrower’s obligation is due and unpaid. Communication in conjunction with other contact: A servicer may, but need not, rely on live contact established at the borrower’s initiative to satisfy the live contact requirement. Servicers may also combine contacts made pursuant to the Early Intervention Rule with contacts made with borrowers for other reasons, for instance by adding a brief script to collection calls to inform consumers that loss mitigation options may be available in accordance with the rule. Unresponsive borrower: The CFPB believes that a borrower’s failure to respond to a servicer’s repeated attempts at communication pursuant to the Early Intervention Rule is a relevant circumstance to consider. For example, “good faith efforts” to establish live contact with regard to delinquencies occurring after six or more consecutive delinquencies might require no more than making a single telephone call or including a sentence requesting the borrower to contact the servicer with regard to the delinquencies in the periodic statement18 or in an electronic communication. Such
16 Servicers are not required to comply with the Early Intervention Rule and the Continuity of Contact Rule with regard to a billing period prior to January 10, 2014, for which a borrower is delinquent. For example, for a borrower whose payment is due and unpaid on January 9, 2014 for that particular billing cycle, compliance is not required under either rule unless and until the borrower is delinquent again for a later billing cycle. 17 12 CFR 1024.39, Supplement I to Part 1024—Official Bureau Interpretations, Comment 39(a)-1.ii, as published in 78 FR 10695 (Feb. 14, 2013). 18 12 CFR 1024.41, as published in 78 FR 10695 (Feb. 14, 2013) and amended by the final rule issued on September 13, 2013, available at http://files.consumerfinance.gov/f/201309_cfpb_titlexiv_updates.pdf. For example, this statement could appear at the bottom of the delinquency box or in a section reserved for messages from the servicer. 12 CFR 1026.41(d)(8) and 1026.41(c)-2, respectively, as published in 78 FR 10901 (Feb. 14, 2013). Placement of the statement at the bottom of the delinquency box would not conflict with the “close proximity” requirement applicable to delinquency information.” Id. at 1026.41(d)(8).
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efforts might be appropriate where there is little or no hope of home retention, such as when all applicable loss mitigation possibilities have been exhausted (including a short sale or deed in lieu of foreclosure), as may occur in the later stages of foreclosure. 3. Servicing Rule Requirements with Regard to Borrowers Prohibiting Debt
Collectors from Communicating with Them. The CFPB is issuing guidance regarding the interplay between certain of the 2013 RESPA and TILA Servicing Final Rules and the Fair Debt Collection Practices Act (FDCPA).19 The CFPB is providing this bulletin as an advisory opinion interpreting the FDCPA “cease communication” requirement in relation to the 2013 Mortgage Servicing Final Rules discussed below, under FDCPA section 813(e), 15 U.S.C. 1692k(e). As provided in that section, no liability arises under the FDCPA for an act done or omitted in good faith in conformity with an advisory opinion of the CFPB while that advisory opinion is in effect. The FDCPA grants debtors the right generally to bar debt collectors from communicating with them. 20 To the extent the FDCPA applies to a servicer’s activities regarding a borrower, the “cease communication” provision of the FDCPA may make such a servicer uncertain whether it will be liable under the FDCPA for carrying out certain communications required by the servicing rules. This bulletin addresses such a servicer’s obligation with regard to certain provisions of the servicing rules requiring disclosures to and communications with borrowers who have defaulted on the payments of their mortgage loans when they have instructed the servicer to cease communicating with them. The CFPB concludes that the FDCPA “cease communication” option does not generally make servicers that are debt collectors liable under the FDCPA if they comply with certain provisions of Regulation X (12 CFR 1024.35 (error resolution), 1024.36 (requests for information), 1024.37 (force-placed insurance), and 1024.41 (loss mitigation)) and Regulation Z (12 CFR 1026.20(d) (adjustable-rate mortgage (ARM) initial interest rate adjustment) and 1026.41 (periodic statement)). For the reasons discussed below, the CFPB concludes that a servicer that is considered a debt collector under the FDCPA with respect to a borrower that provides disclosures to and communicates with the borrower pursuant to the provisions listed above, notwithstanding a “cease communication” instruction sent by the borrower, is not liable under the FDCPA. This conclusion does not extend to the notices/communications required by 12 CFR 1024.39 (Early Intervention Rule) and 12 CFR 1026.20(c) (ARM Interest Rate Adjustment with Corresponding Payment Change Rule). See Interim Final Rule, available at http://www.consumerfinance.gov/regulations.
Error Resolution, Information Requests, and Loss Mitigation Rules21
19 15 U.S.C. 1692 et seq. 20 Section 805(c) of the FDCPA generally prohibits debt collectors from communicating with consumers regarding a debt after having received a written “cease communication” request. 15 U.S.C. 1692c(c). 21 12 CFR 1024.35 and 1024.36, as published in 78 FR 10695 (Feb. 14, 2013), and 12 CFR 1024.41, as published in 78 FR 10695 (Feb. 14, 2013) and amended by the final rule issued on September 13, 2013, available at http://files.consumerfinance.gov/f/201309_cfpb_titlexiv_updates.pdf.
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These servicing rule provisions, respectively, require servicers to (1) investigate and resolve certain borrower-reported errors relating to the servicing of the borrower’s mortgage loan, (2) respond appropriately to borrower requests for information with respect to a borrower’s mortgage loan, and (3) consider appropriately a borrower’s loss mitigation application. The CFPB believes that a borrower’s “cease communications” request pursuant to the FDCPA should ordinarily be understood to exclude these categories of communication, because the borrower has specifically requested the communication at issue. Even if the borrower sends a “cease communications” request while a specific action the borrower requested of the servicer is in process, the borrower usually should be understood to have excluded the specific action from the general request to cease communication. Thus, only if the borrower sends a communication to the servicer specifically withdrawing the request for such action may a servicer cease to carry out the requirements of these provisions.
Force-Placed Insurance, ARM Initial Interest Rate Adjustment, and Periodic Statement Rules22 These servicing rule provisions, respectively, require the servicer to provide borrowers with (1) disclosures regarding the forced placement of hazard insurance, (2) a disclosure regarding an ARM’s initial interest rate adjustment, and (3) a periodic statement for each billing cycle. The CFPB has determined that a servicer acting as a debt collector would not be liable under the FDCPA for complying with these requirements despite a consumer’s “cease communication” request. These disclosures are specifically mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),23 which makes no mention of their potential cessation under the FDCPA and presents a more recent and specific statement of legislative intent regarding these disclosures than does the FDCPA. Moreover, the CFPB believes that these notices provide useful information to consumers regardless of their collections status.
For more information about the implementation of the 2013 RESPA and TILA Servicing Final Rules and other new mortgage rules issued by the CFPB, visit http://www.consumerfinance.gov/regulatory-implementation. Guidance inquiries may be directed to CFPB_reginquiries@cfpb.gov or (202) 435-7700.
22 12 CFR 1024.37, as published in 78 FR 10695 (Feb. 14, 2013); 12 CFR 1026.20(d), as revised by 78 FR 10901 (Feb. 14, 2013) and 12 CFR 1026.41, as published in 78 FR 10901 (Feb. 14, 2013), respectively. 23 Public Law 111-203, secs. 1418, 1420, 1463, 124 Stat. 1376 (2010). Dodd-Frank Act sections 1418 (ARM initial interest rate adjustment), 1420 (periodic statements), and 1463 (force-placed insurance). Servicers are not required to provide periodic statements to borrowers in bankruptcy. See Interim Final Rule, available at http://www.consumerfinance.gov/regulations.
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©National Consumer Law Center 2016
Saving Homes in Bankruptcy
Alabama Foreclosure Training
June 2, 2016
*Fresh Start for Debtors
*Fair and Equitable Distribution of
Non-Exempt Assets to Creditors
Key Bankruptcy Concepts
Fresh Start
Fair and Equitable Distribution among
Creditors
Automatic Stay
Exemptions
Discharge
Avoiding preferential transfers to creditors
Claims bifurcation
Pro rata distribution among creditors
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2
The Automatic Stay
Limits of the Stay: Repeat Filers
Date petition
filed
One year
Within one year before filing:One dismissal = auto stay for 30 days (unless extended)Two or more dismissals = no automatic stay! (§ 362(c))
Eligibility to File: Repeat Filers
Date petition
filed
180 days
Within 180 days before filing:Voluntary dismissal after a Motion for Relief from Stay?Court order dismissing with prejudice for willful failure?= Ineligible to file, and no auto stay (§ 109(h), § 362(b)(21))
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The Bankruptcy Estate
7
1. Debtor’s
assets go into the estate upon
filing
2. Property
claimed as exempt comes out of the
estate
Debtor’s
prepetition assets
Debtor’s exempt
property, part of the fresh start
Chapter 7 vs. Chapter 13
Chapter 7 Chapter 13
* Creditors get paid from
liquidation of any non-exempt
assets
* Creditors get paid from
Debtor’s disposable income
over a 3-5 year payment plan
* If Debtor owns property
beyond what she is allowed to
claim as exempt, the Trustee may sell it
* Debtor gets to keep non-
exempt assets
* Case is over and discharge is
entered in about 4-6 months
Case is over and discharge is
entered after the Debtor
completes plan payments (3-5 years)
Credit Counseling
Filing Fee/Fee Waivers
Means Test
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Why not Chapter 7?
Secured Creditors Stay Secured
• Unless a Court orders otherwise, the lien (or security
interest) survives the bankruptcy
• Thus, secured creditors will still be able to foreclose on a home or seize other property if consumer is in default
– They may file a motion for relief from stay or wait for the
discharge to be entered
• Personal liability on secured debts is wiped out (no deficiency after foreclosure, for example)
Saving Homes In Chapter 13
Secured Claims
• “Allowed secured claim” is limited to the
value of the collateral – § 506(a)
• Undersecured claims may be bifurcated
into their secured and unsecured portions
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Debt Owed - $10,000
Value- $6,000
Allowed Secured Claim
$6,000
Allowed
Unsecured Claim$4,000
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Anti-modification Rule (mortgage on principal residence)
Section 1322(b)(2) – The plan may “modify the rights of holders of secured claims, other than a claim secured
only by a security interest in real property that is the
debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims”
So… what can you do?
• Automatic Stay to stop foreclosure
• Cure and maintain the mortgage (unwind acceleration)
• Apply for loan mod while in ch 13
• Modify/strip off some mortgages
• Avoid judicial liens
Cure and
Maintain
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Right to Cure
• 1322(b)(5) the plan may provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any claim in which the last payment is due after final plan payment
• Arrearages include reasonable pre-petition foreclosure costs
• All payments are made under the plan even if debtor disburses ongoing maintenance payments.
POC Requirements
Payment Change
Notices
Notice of Fees or
Charges
Notice of Final Cure
Proof of Claim Requirements
• For all claims, itemized statement of interest, fees and other charges
• For security interest in debtor’s property, amount necessary to cure any default
• For security interest in debtor’s principal residence, Official Form B10, Attachment A and mortgage escrow statement prepared as of petition date
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Payment Change Notices
• Applies to security interest in debtor’s principal residence treated in plan under § 1322(b)(5)
• Notice of payment change 21 days priorto change – Fed. R. Bankr. P. 3002.1(b)
Notice of Fees and Charges
• Applies to security interest in debtor’s principal residence treated in plan under § 1322(b)(5)
• Notice of fees or charges imposed during the chapter 13 case, no later than 180 days after fees incurred – Fed. R. Bankr. P. 3002.1(c)
• 180-day period based on date when fees “incurred,” not when advanced or determined to be recoverable
Notice of Final Cure
• Notice of final cure filed by trustee no later than 30
days after plan completion - Fed. R. Bankr. P. 3002.1(f)
• If trustee does not file the notice and debtor believes all cure and plan payments have been made, debtor may file notice
• Mortgage holder must file a response
• If response says the loan is not current, debtor may object and court will determine after notice & hearing
• Mortgage holder who does not respond may be barred from later presenting evidence to the contrary
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Loss Mitigation
and Litigation
in Bankruptcy
Loss Mit in Bankruptcy
• Borrower may apply for a loan mod during bankruptcy (or continue with an application that was initiated prior to the bankruptcy)
• No HAMP rule prohibits mods while in bankruptcy (MHA Handbook, Ch. II, §§ 5.2, 8.6)
– Fannie Mae: at servicer’s discretion, § 609.01
– Freddie Mac: borrower in active bk must be considered if borrower, borrower’s attorney, or the trustee submits request; § C65.7.1
• Bankruptcy attorney may have to sign a form or send a letter authorizing servicer to keep communicating with borrower or the borrower’s 3P rep
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Loss Mit in BankruptcyOptions for the Ch. 13 Plan:
1) Standard plan to cure mortgage arrears
• Can client afford it? Does this contradict the request for mod?
2) Plan for a loan mod, saying arrears will be cured through loan mod and including the anticipated modified payment of 31% of debtor’s gross monthly income in the budget (may serve as pre-confirmation adequate protection)
• In re Arizmendi, 2011 WL 2182364 (Bankr. S.D.Cal. May 26, 2011) (finding that TPP payments provided sufficient adequate protection even though contract interest not being paid)
3) Confirmable plan with lump sum at the end to treat the arrearage
• Feasibility is based on the expected loan modification* Remember the binding effect of plan confirmation order.
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Bankruptcy and HAMPCourt Approval of loan mods:
• Servicer and its counsel must work with borrower or borrower’s counsel to obtain any court and/or trustee approvals required in accordance with local court rules and procedures.
– MHA Handbook Ch II, 8.5
• In re Smith, 409 B.R. 1 (Bankr. D. N.H. 2009) (finding that motion for approval of loan mod. does not present court with a case or controversy unless filed in connection with proceedings for stay relief, plan confirmation, or plan modification)
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Loss Mit/Litigation in Bankruptcy
• RESPA Reg on Loss Mitigation, 12 USC 1024.41, does not have a bankruptcy exemption!
• Servicer must acknowledge application and notify borrower if it is complete, docs needed to complete it (and deadline) within 5 business days
• Servicer must evaluate within 30 days of receipt of a complete application
• Dual tracking restrictions (use them to argue against Motion for Relief from Stay?)
• Consider filing an Adversary Proceeding for a claim under RESPA
Stripping Off
2nd Mortgages
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Anti-modification Provision
Section 1322(b)(2) – The plan may “modify the rights of holders of secured claims, other than a
claim secured only by a
security interest in real
property that is the debtor’s
principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims”
Parsing the Language
Section 1322(b)(2) – The plan may “modify the rights of holders of secured claims, other than aclaim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims”
Underwater Homes
Value of Home: $120,000Amount due on First
Mortgage: $125,000Amount due on Second Mortgage: $15,000
Total Amount of debt: $140,000
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Underwater Mortgages
Value of home
$120,000
Underwater Mortgages
Value of home
$120,000
Amount owed on first mortgage
$125,000
Undersecured by $5,000
Underwater Mortgage
Value of home
$120,000
Amount owed on first mortgage
$125,000
Amount owed on second mortgage - $15,000
Undersecured by $5,000
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Doing the Calculations
• If total of all senior liens equal or exceed property’s value, junior lien creditor has no allowed secured claim
• Homestead Exemption not considered
• Other considerations:
– Effect of first lien loan mod with principal reduction?
Proving Value of the Property• Valuation date (three approaches):
– Petition date– Effective date of plan (helpful in declining market)– Flexible approach
• Discovery– Obtain pre-foreclosure appraisal by servicer– Make use of request for admissions
• Debtor may initially rely upon BPO or recent appraisal, but will need appraiser to testify if value contested
• Debtor may testify as to condition of property, neighborhood, etc. as lay witness (F. Rule Evid. 701)
Strip Off Procedure
*Check Local Decisions, Rules and Practice
Adversary proceeding?
– Complaint to determine validity and extent of lien
• Motion/Contested matter?
– Motion to determine value of claim secured by lien (Rule 3012)
• Chapter 13 plan provision
– Make explicit and serve under Rule 7004 (due process)
• Objection to Claim
– Avoid decisions on preclusive effect of claim allowance process
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Other
Permissible
Mortgage
Modifications
Parsing the Language
Section 1322(b)(2) – The plan may “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims”
Mobile Homes
Loans on mobile homes that are considered personal property
under state law are not subject to the anti-
modification provision
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Multi-family Buildings
Modification permitted when other real
property, such as rental units, is part of
security interest
Parsing the Language
Section 1322(c)(2): “in a case in which the last
payment on the original payment schedule for a claim secured only by… the debtor’s principal residence is due before the date on
which the final payment
under the plan is due…”… may be modified.
Short-term loan/ final payment within next 5 years
Loans where the final payment will come due within the term of the
chapter 13 plan are not subject to the anti-
modification provision
(people near the end of their 30-year mortgage…)
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Lien
Avoidance
Lien Avoidance• Debtor may avoid “fixing of a lien” on interest of the
debtor in property to the extent the lien impairs an exemption
• Judicial liens• A lien shall be considered to impair an exemption to
the extent that the sum of –
– the lien;– all other liens on the property; and– the amount of the exemption that the
debtor could claim if there were no liens on the property;
– exceeds the value that the debtor’s interest in the property would have in the absence of any liens
• Courts have held that this formula is to be applied literally
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©National Consumer Law Center 2013
Overview of Tax Issues
Alabama Foreclosure Training
June 2, 2016
Discharge of Indebtedness
(Cancellation of Debt)
• Whenever debt is forgiven, normally
treated as income
• Why?
– Income received when loan taken out
– But not taxed because of obligation to repay
• Interest & fees need not be treated as
DOI, only principal
Examples of DOI
• Foreclosure sale, if for less than amount of debt & lender does not seek deficiency judgment
• Short sale
• Loan modification with reduction of principal
• Theoretically, loan modification with significant interest reduction or principal forbearance
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Why Does DOI Matter?
• Lenders usually file 1099-C’s.
• If borrower does not report the DOI
income on her tax return, the IRS’s
automated audit system will pick it up.
• Borrowers can get dunned by IRS for
interest and penalties on underreported tax
Common Exclusions from DOI
• Bankruptcy (timing is important!)• Insolvency
Can’t pay
• 2016 extension
Acquisition (qualified principal residence) indebtedness
• Disputed indebtedness• Fraud in purchase
Illegal debt
The Bottom Line
• Homeowner needs to know why the debt was discharged and how much
• Homeowners must:– File long form 1040
– Attach Form 982
• If a homeowner gets a dunning notice from the IRS, they can contest it
• These issues are out of scope for VITA and Tax Counseling for the Elderly sites, with a few limited exceptions
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The Special Case of HAMP Principal
Reduction Modifications
(General Welfare Payments)
Annual borrower incentive payments under HAMP (pay-for-performance) don’t count as income
• IRS Rev. Rul. 2009-19
Payments to the investors to encourage principal reductions, subsidize loan modifications don’t count as income.
• IRS Rev. Proc. 2013-16, at 14
Payments made to or on behalf of borrowers under the Hardest Hit programs don’t count as income.
• IRS Notice 2011-14, 2011-11 I.R.B. 544
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©National Consumer Law Center 2013
The Role of Mediation in
Foreclosure Loss Mitigation
Alabama Foreclosure Training
June 2, 2016
State Responses to Need for Loan Modifications: Mediation/Conference Programs
• Seventeen states have required by statute
or court rule some type of mediation/conference requirement to
consider loan modification before
foreclosure.
Labels
• The process itself: mediation, diversion,
conference, ADR, conciliation
• The outside third party: mediator, referee,
facilitator, judge pro tem.
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Authority for Foreclosure Mediation Programs
• State Statutes: Connecticut, Delaware, New York, California, Michigan, Indiana, Oregon,
Nevada, Maine, Maryland, Washington, Hawaii, Vermont, Rhode Island, D.C.
• State Supreme Court plans: Ohio, New
Jersey
• Many local court initiatives, including Pennsylvania (Philadelphia & Pittsburgh),
Illinois counties.
Procedural Variations
• Programs requiring opt-in over limited time: Ohio, New Jersey, Maryland, Nevada
• How much time?• Other procedural limits
• Programs with automatic participation: Delaware, New York, Connecticut, Philadelphia
• Stay of proceedings
• Automatic or must request• Must file motion
Foreclosure Mediation Programs
• Can require authorized representative of
mortgage holder to meet with borrower.
• Can require compliance with mediation
rules as condition to proceeding with foreclosure.
• Can require consideration of specific loan modification and other workout options.
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Mediation: Things a Servicer May be Asked to do
• In certain programs (depending on
jurisdiction) may be asked to:
– Provide document showing modification/NPV analysis
– Provide specified documents: psa, loan
origination docs, appraisal, payment history
Mediation: Things a Mediator May be Asked to do
• In certain programs:
– May certify compliance with servicer obligations.
– May not allow foreclosure to proceed unless servicer has complied with mediation obligations:
• Produced documents
• Show considered all options
Common Servicer Practices Mediations Can Address
• Incorrectly stating not a HAMP participant
• Incorrectly stating investor does not permit HAMP modifications
• Offering non-HAMP mods with less favorable terms
• Demanding redundant, unnecessary documents not required under Handbook
• Routine loss of documents
• Erroneously stating did not receive documents
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Common Servicer Practices Mediations Can Address
• Demanding fees and charges for HAMP mod
• Referral to foreclosure, proceeding with foreclosure, or conducting sale in violation of foreclosure stop requirements of Handbook § 3
• Foreclosure upon borrower current in trial plan
• Negative credit reporting while non defaulting
borrower current under trial plan
• Extension of trial plans beyond date of
conversion promised in trial agreement
Common Servicer Practices Mediations Can Address
• Soliciting HAMP application, then refusing
to give decision
• Failure to send accurate notices of
denial/cancellation, or missing documentation (Handbook § 2.3)
• Failure to disclose NPV data as required by Dodd-Frank
Connecticut Mediation Program
• Data provided by the Connecticut Judiciary covering the period from July 2008 through Dec. 2015 indicates as follows:
• 24,000 completed mediations
• 70% settlement with agreement to stay in home
• 15% settled with agreement to move from home
• 15% had not settled, foreclosure action continued
• In 84% of mediations completed with agreement for borrower to stay, borrower received permanent loan modification
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The nonprofit National Consumer Law Center® (NCLC®) helps build family wealth for low-income and other disadvantaged people in
the U.S. by offering advocacy expertise through publications, policy analysis, research, litigation services, and training. www.nclc.org
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Note: Additional loss mitigation options may be available under the National Mortgage Settlement or through private litigation.
Available loss mitigation
GSE loan
Repayment plan
Forbearance
GSE HAMP (no
principal reduction
as of 1/20/2014)
Standard/
streamlined mod
Short-sale/deed-
in-lieu
HAMP servicer
HAMP mod
Tier 1
Tier 2
Second Lien Mods
(2MP)
Unemployment/ Disaster
Forbearance
HAFA (short sales,
deeds in lieu)
Non-HAMP servicer
Repayment
Forbearance
Loan modification
Short-sale or deed-in-
lieu
Government-insured: FHA, RHS/ USDA/FmHA, VA
Repayment
Forbearance
Non-HAMP loan modification
Program version of HAMP
FHA loans include option for partial claim
FHA, VA loans allow for assumption
VA loans include option for repurchase by government
Short sale/ deed-in-lieu
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How loans are modified
Principal balance adjusted
Fees waivedArrearages capitalized
Principal forbearance (non-interest
bearing balloon)
Principal reduction
Interest changed
Interest reduced,
permanently or temporarily
Converted from
adjustable to fixed or vice
versa
Amortization term changed
(usually extended)
New obligor substituted
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Possible Mediation Outcomes
Mediation Fails; Foreclosure
Restarts
Agreement Reached in Mediation
Homeowner Keeps House
Refinancing/ Loan Paid Off
Reinstatement/ Repayment Agreement
Modification
HAMP modification
Non-HAMP modification
Homeowner Loses House
Short Sale Deed-in-Lieu
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