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November2009lMakingHomeAffordable
MakingHomeAffordable
Information
for
Housing
Counselors
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TodaysTopics:
MHAandCounselorResources
MHARefinance(HARP)
MHALoanModifications(HAMP)
OtherProgramsforBorrowers
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WhatisMakingHomeAffordable?
PartofPresidentObamasHomeowner
Affordabilityand
Stability
Plan
to:
Supporteconomicrecovery
Stabilizecommunities
&
housing
markets
MakingHomeAffordableputseligibleborrowers
intomortgagestheycanaffordtorepay:
HomeAffordableRefinanceProgram(HARP)
HomeAffordableModificationProgram(HAMP)
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YourRoleasaCounselorinMHA
Counselorsplayacriticalrolehelpingclientsto:
UnderstandMaking
Home
Affordable:
Refinance(HARP)orModification(HAMP)Options
Eligibilityanddocumentationrequirements
Application
and
Trial
Period
processes
KeeptrackofMHAdeadlines,documentrequirements
PursuealternativesifineligibleforMHA
Stayfocusedontheirnext,best,practicalstep
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GettingStarted:
MakingHomeAffordable.gov
EasytoUseLoanLookup toolslet
clients
see
if
Fannie,
Freddie
owns
theirmortgage
Onthe
Home
Page,
consumers
can
access:
SpanishContent
1888995HOPE(4673)
BewareofScams
InformationVideo
HelpfulLinksinFooter
SampleHome
Page
ChecklisttoPrepareBorrowers to
speakwithmortgagelender,
counselor
UpdatedList ofParticipating
MortgageServicers
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Keyfor
Counselors:
MakingHomeAffordable.gov/ads
Consumerbrochures,factsheetsin
English,Spanish,Chinese,Korean,
others
CounselorSection:
Q&A,Presentations
WebreadybanneradsforMaking
HomeAffordableProgram
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EasytoUseMainNavigation
forServicerstoQuicklyLearn
AboutHAMP
FromtheHomePage,servicerscan
access:
RegistrationInformationandForms
WebTraining
FAQs
NewsandUpdates
GuidanceFor
Servicers:
www.HMPadmin.com
SampleHomePage
AccessHardshipAffidavitand
OtherModification
Documents
EasyAccesstothe
SupplementalDirective
ProgramGuidelines
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AdditionalResources:
Programdetailsforborrowers,servicersandcounselors
www.FinancialStability.gov
www.HMPadmin.com
www.hud.gov foralistofapprovedhousingcounselors(by
state).
ForImmediateBorrowerAssistance:
Call1888995HOPE (4673)
FannieMae
www.fanniemae.com or18007Fannie
FreddieMac
www.freddiemac.com or1800Freddie
NonGSEEscalations
18669394469orsupport@HMPadmin.com
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HOMEAFFORDABLEREFINANCEPROGRAM(HARP)
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HARPOverview
Helpcurrentborrowersunabletorefinancedueto
decliningproperty
values
Makepaymentsmoreaffordableand/orstable
Replace
ARM,
Option
ARM
etc.
with
fixed
rate
mortgage
Reduceamortizationterm
HARPendsinJune2010
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HARPEligibility
Criteria
Borrower:
Owneroccupant
of
a14unitproperty
Iscurrentonthe
mortgage Hasreasonable
abilitytopaythenewmortgagepayment
Loan:
Ownedor
guaranteed
by
FannieMaeorFreddieMac
First mortgagecannot
exceed125%ofpropertyscurrentmarketvalue
Refimust
improve
affordabilityorsustainability
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125%LTVopensdoorforborrowerswhosehome
values
declined Relaxedcreditscorerequirements
Nocombinedloantovaluerequirement
MIflexibilitiesforloanswithhigherLTVs
Limitedcashouttocoverclosingcostsonly;no
debtconsolidation
HowHARP
Differs
from
Standard
Refinance
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HowDo
IHelp
My
Client
Apply
for
HARP?
Determinebasiceligibilityusingloanlookuptools
onwww.MakingHomeAffordable.gov
Contactclientsserviceroranylenderoffering
FreddieMac
or
Fannie
Mae
loans
KeyforCounselors
ContactlendermortgageoriginationshopforHARPfirst
HARPalsoavailablethroughGSEservicingshops
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HOMEAFFORDABLEMODIFICATIONPROGRAM(HAMP)
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HAMPOverview
Modify1st and2nd loansofeligibleborrowersto
achieveaffordable
payments
Helpborrowerskeeptheirhomes
Reduce
impact
of
foreclosure
on
communities
Incentiveborrowerparticipation
HAMPends
December
2012
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HAMP:Eligibility
Criteria
Borrower:
Owneroccupantof14unitproperty
Has
sufficient,
documentedincome
to
supportthemodifiedpayment
Hasfinancial
hardship
andisdelinquentoratriskofimminentdefault
Loan:
Amountowedonfirstmortgageequaltoorlessthan$729,750
Mortgageoriginated
on
orbeforeJanuary1,2009
Firstmortgagepayment
(PITI+homeowner
association/ condofees)isgreaterthan31%ofborrowersgrossincome
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DeterminingImminent
Default
Borrowerswhoarecurrentontheirloansbutare
strugglingto
make
payments
may
also
be
eligible
forHAMPifthey:
Haveadocumentedhardship decreaseinincome,increaseinexpenses,facinginterestrateincreasewithinthenextfourmonths,etc.
Do
not
have
sufficient
savings
or
other
liquid
assets
tomakefuturepayments.
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BorrowersIneligible
for
HAMP
Borrowerswithmortgages:
PreviouslymodifiedunderHAMP
Secured
by
investment
properties,
secondary
residences,orvacantorcondemnedproperties.
Monthlypaymentisalreadylessthan31%debtto
incomeratio
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ServicersDetermine
Eligibility
Evaluateborrowerincomeanddebtinformation:
Mayrely
on
verbal
information
for
trial
period
but
servicerwillneedtoverifyanddocumentbefore
modification isfinal
Tip:Clients
should
keep
aduplicate
set
of
all
requesteddocumentsfortheirrecords.
Keyfor
Counselors
Prepareborrowertoworkeffectivelywithservicer
Facilitateborrower/servicerinteraction
MandatorycounselingforborrowerswithDTI>55%
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ServicersApply
Net
Present
Value
(NPV)
NPVisamathematicalmodelusedtoanalyzethecost/benefit
ofinvestmentdecisions
MHANPV
factors
include:
Homevaluerelativetomortgageamount
Likelihoodofforeclosure
Homeprice
trends
Costofforeclosureandcostofmodification
Defaultrateanddiscountrate
Fannie Mae and Freddie Mac Loans: Servicer must pursue modificationwhether the NPV calculation is positive or negative
Non-GSE Loans: NPV positive: Servicer must modify loan NPV negative: Servicer may modify loan but is not required to do so
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HAMP:The
Waterfall
Servicersmustapplythesequentialsteps(The
Waterfall)as
needed
to
cut
loan
payment
to
31%
of
eligibleborrowersmonthlypretaxincome.
1. Capitalizeoutstandinginterest,escrowadvances,
outof
servicing
expenses
(no
late
fees)
2. Cutinterestratetoaslowas2%
3. Extendloan
term
up
to
40
years
4. Deferportionofprincipal,interestfree,untilloan
ispaidoff
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HAMPModification
Example
NicksCurrentMonthlyPayment
Principal&
Interest $1,877
Taxes 300
Insurance 80
AssociationFee 50
MortgageInsurance 100
TotalMonthly
Payment$2,407
Client: NickfromNorthernVA
2005: Buys$330,000home
10%downpayment
$297,000mortgage
(30yrfixed@6.5%)
2008: Incomedropsto
$47,000duetosudden
illness
Target Monthly PITIA paymentfor HAMP is $1,214.
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HAMPModification
Example:
Steps
14
HAMP
Waterfall
Current AfterHAMP
Step1 Add$18,722inunpaidinterestandadvances
$286,359
UnpaidPrincipalBalance$305,131UPB
Step
2Cutinterestrateto2% $2,307
monthlypayment
(Principal,interest,
taxes,insurance,
associationfees)
$1,650PITIA
Step3 Extendtermto40years $1,644PITIA
Step4 Forbear
$46,000inprincipal
$1,214PITIA
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HAMPModification
Example:
Interest
Rate
IncreasesYear Interest
Rate
PITIA
(minusMI)
1 5 2% $1,214
6 3% $1,342
7 4% $1,476
8 40 4.85% $1,594
NicksHAMP
payment
is
set
at
$1,214
for
5yrs.Marketrateattimeofpermanent
modificationwas4.85%.
Nicksaves$65,580inthefirstfiveyears
Startinginyear6,Nicksinterestrate
risesup
to
1%
per
year
until
market
rate
attimeofpermanentmodificationis
reached.
Inyear8,interestrateof4.85%isfixed
forlife
of
Nicks
loan.
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ThreeMonth
Trial
Period
Serviceroffers3monthtrialmodificationaftereligibility,NPVtest,
modifiedpaymentcalculationcompleted
Modification
final
after
borrower
makes
all
3
trial
period
payments,
sendsinalldocuments,signedmodificationagreement
Keydocumentsinclude:
4506Tor4506TEZ
Mostrecent
paystubs
for
all
borrowers
HardshipAffidavit
Documentwaivers,extensionspossibleunderrevisedguidance
KeyforCounselors
Helpclientsunderstanddocsandimportanceofreturningthemto
servicer
Coach
borrowers
for
long
term
success
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OTHERPROGRAMS
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SecondLien
Mortgage
Modification
Program
(2MP)
Eligibility:
First
mortgage
is
modified
through
HAMP
2nd lienlenderisparticipatingin
2MP
2nd
lien
originated
on
or
before
January1,2009
Borrowermustconsenttoshare1st
mortgagemodificationdatawith2nd
lienlender(ifthelendersare
different)
0%
1%
2%
3%
4%
5%
6%
1 2 3 4 5 6 7 8
Year
MortgageRate
1st Lien
2nd Lien
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Programsfor
Clients
Who
Dont
Qualify
for
HAMP
PotentialoptionsforclientswhodontqualifyforHAMP
dependonwhoownstheirloan:
IfGSE
owns
mortgage:
GSEmayrequireasecondlook
GSEservicersmustalsoevaluateforforbearance,
repaymentplans,
loan
modifications
Borrowerlacksfundstocontinueowninghome:
Shortsale
Deed
in
lieu
KeyforCounselors
Helpclientunderstandalternativesthatmaybeavailable
Coachclientforlongtermsuccess
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FederalHousing
Administration:
FHA
HAMP
FHAdefersprincipalwithaPartialClaim
Norequirement
to
modify
rate
to
below
market
Noincentivepaid
NoNPVrequired
Conditionalimminentdefault
Cannotexceed55%DTI
Modifiesmortgage
to
30
year
fixed
rate
term
FormoreinformationvisittheNationalServicingCenters
websiteatwww.hud.gov/offices/hsg/sfh/nsc/nschome.cfm ,
orcalltheNationalServicingCenterat18882978685.
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FederalHousing
Administration:
FHA
HAMP
PartialClaimisavailableupto30%oftheFHAloanprincipal
balance;including
arrearages
(up
to
12
months),
legal
fees
andapplicableforeclosurecosts
PartialClaimisnoninterestbearingandnopaymentisdue
until
the
earlier
of
(a)
maturity
of
the
original
FHA
loan;
(b)
saleoftheproperty;(c)payofforrefinanceoftheFHAloan
PartialClaimisusedtoreducetheprincipalbalanceonthe
FHAloan,whichisthenmodifiedtolowerthemonthly
paymentto
adebt
ratio
as
close
as
possible,
but
not
less
than,31%
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FederalHousing
Administration:
FHA
HAMP
Subjectpropertymustbeborrowers primaryandonly
residence HardshipAffidavitrequired
Noappraisalrequired
Nominimum
credit
score
required
12monthseasoningoforiginalFHAloan;minimum4full
paymentsmade
Trialmodification for
three
months
Allexistingsecondaryfinancingmustbesubordinatedto
maintainthefirstlienpriorityoftheFHAloan
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CounselorRole
in
Making
Home
Affordable
EducateclientaboutMakingHomeAffordable
programs
and
processes
Resourcesforclient,suchasMHA.gov,loanlookup
toolsatfreddiemac.com,fanniemae.com
Helpclients
submit,
track
HAMP
applications
and
take
nextsteps:
SignHAMP
documents,
submit
payments
Ifineligible,findothermodificationsorforeclosure
alternatives
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www.MakingHomeAffordable.gov
1888
995
HOPE
(4673)
MakingHomeAffordable