Sustaining the Single Family Portfolio Post Hardest Hit Fund Rhode Island

2014 NCSHA ConferenceOctober 21, 2014

Leslie McKnight, Director of Loan Servicing

Need• Rhode Island leads New England in total #

delinquencies• Since end of HHFRI application period– almost 2,000

completed foreclosures in Rhode Island (avg. 130/month)

• Borrowers assume no help available and give up on payments and their properties.

• Many borrowers have no other option but short-sale, deed-in-lieu or foreclosure

Response to Need• Innovative loan modification program to

meet the needs of our customers and mitigate losses from defaults and foreclosure

• Program mirrors the FHA Loss Mitigation program

Program Goals• Reduce number deed-in-lieu transfers, foreclosures and

short-sales– lowering expenses and losses related to transactions

• Lower rates of default – reduced losses and exposure to mortgage insurance companies

• Financial stabilization for borrowers– bring loans current and build equity

• Stabilize neighborhoods and real estate market– reduce # foreclosures and vacant properties

Program Highlights• Review each borrower’s options through our

“waterfall” analysis – find best alternative to increase likelihood

borrowers make payments and keep their property

– 4 Options

Challenges• Approvals and “buy in” from financial partners• Ensuring program did not expose us to other losses

and or negatively impact bond ratings• Operational and administrative modifications– Loan documents– Delinquency reporting– Servicing system updates and– Performance/outcome tracking

Summary• Communities across the United States are

experiencing steady and even increasing rates of foreclosure.

• Every default or foreclosure negatively impacts our portfolio and our ability to achieve our mission.

• This proactive program was developed to halt and reverse the losses represented by foreclosure.

Results• Modified more than $6.4 million in first mortgages• Assisted more than 300 borrowers bringing their

delinquency current and reducing their payment– 171 (54.5%) live in hardest hit communities– Avg. payment reduction: $241.73/month– Total principal balance of modified loans: $43,495,098

• May 2013 vs. May 2014-update– decrease in our most serious delinquency category

(90+ days) of 105 loans = $18.5 million• nearly 26% reduction in # of seriously delinquent loans

Results• 33.9% fallout rate for scheduled foreclosures vs.

20.3% fallout rate for 2013• Reduction in loan losses– $1.3 million reduction in overall losses from REO in last

fiscal year and $2.4 million reduction in loan loss reserve

• Approximately 16 delinquent borrowers who have previously closed under this program– Approx. 5% delinquency rate, actually lower than our

current portfolio delinquency rate

How Program is Unique?

• Deferred arrearage which is potentially forgivable

• 4-year principal deferral provides significantly reduced payment– provides the borrower with financial stabilization • equity building through principal payment• real estate appreciation

Impact on Agency Operations

• Historically avg. loss $62,000/foreclosed property & $44,000 short sale

• Based on $15 million pilot program,– assisted more than 300 borrowers (avg. $20,733

per with principal, interest, escrow deferral totaling $6,447,850), avoiding potential losses of $7.9 million (assuming 50% ended in short sale or foreclosure)

Thank You!

Contact Information:Leslie McKnight, Director, Loan ServicingPhone: 401-457-1184Email: Lmcknight@rhodeislandhousing.org