Making Home Affordablecedamichigan.org/wp-content/uploads/2010/10/MHA-Round... · 2012-12-12 · or responds to servicer solicitation letter. • Initial Package includes: –Request

September 2010 l Making Home Affordable

Making Home AffordableWorking Together to Help Homeowners

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The Crisis Continues

Foreclosures continue to devastate families and communities across the country.


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Response to the Crisis

• Homeowner Affordability and Stability Plan boosts affordability and reduces foreclosures. MHA is key.

• The $8,000 Homebuyer Tax Credit helped more than 2.5 million buy houses.

• Historically low 30‐year fixed‐rate mortgages provide affordability and stability for families.

• HUD’s NSP provides resources to purchase, rehabilitate, sell, and rent foreclosed and vacant properties.

• Hardest Hit Fund provides targeted aid to families in states hit hardest by housing downturn.


MHA is part of Administration goal to promote stability and affordability.

4September 2010 l Making Home Affordable

Making Home Affordable Offers Help

• Home Affordable Refinance Program (HARP)• FHA Refinance for Homeowners with Negative Equity• Home Affordable Modification Program (HAMP)

–Home Affordable Unemployment Program (UP)–Principal Reduction Alternative (PRA)

• Second Lien Modification Program (2MP)• Home Affordable Foreclosure Alternatives (HAFA)• Options for mortgages insured, guaranteed, or held by federal government agencies:–FHA (FHA‐HAMP)–USDA (RD‐HAMP)–VA (VA‐HAMP)

• Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (Hardest Hit Fund)

MHA and other programs work together to help homeowners avoid foreclosure and to revitalize the housing market.


• Helps homeowners unable to refinance due to declining property values.

• Makes payments more affordable and/or stable.–Replace ARM, Option ARM etc. with fixed‐rate mortgage.

–Reduce amortization term in order to build equity.

• Extended through June 30, 2011.• Through all refinances, including HARP, 7 million homeowners saving $150/month.

Home Affordable Refinance Program (HARP)

HARP Overview


FHA Refinance – Negative Equity

• Provides homeowner who owes more than home value chance to refinance into FHA loan at no more than 97.75% of home value.

• Homeowner must be current, occupy home as primary residence, and have qualifying credit score.

• Lender writes down unpaid principal balance of 1stlien by at least 10%.

• Total mortgage debt after refinancing may not exceed 115% of home value.

• Treasury provides incentives to participating servicers, investors who extinguish all or part of 2nd

lien.

Provides additional refinancing option for underwater homeowners.

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Home Affordable Modification Program (HAMP)

HAMP Overview

• Modifies 1st liens for eligible homeowners to achieve more affordable or more stable payments.–Helps homeowners keep their homes.–Reduces impact of foreclosure on communities.

• Ends December 31, 2012.


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HAMP Eligibility Criteria

Homeowner:

• Has financial hardship and is delinquent or at risk of imminent default

• Is owner‐occupant of 1‐4 unit property

• Has sufficient, documented income to support the modified payment

Loan:

• Amount owed on firstmortgage equal to or less than $729,750

• Mortgage originated on or before January 1, 2009

• First mortgage payment (PITI + homeowner association/ condo fees) is greater than 31% of homeowner’s monthly gross income


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Home Affordable Unemployment Program (UP)

• Any unemployed homeowner who requests assistance under HAMP must first be considered for UP.

• UP provides temporary assistance to homeowner with hardship related to unemployment.

• Assistance grants homeowners a forbearance where payments are reduced or suspended.

• Effective August 1, 2010.

UP provides some breathing room while homeowner seeks re‐employment.

What if the homeowner is unemployed?


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UP Eligibility Criteria

• Is owner‐occupant of 1‐4 unit property.

• Makes request before seriously delinquent (three months due, unpaid).

• Is unemployed at time of request and eligible for unemployment benefits.

• Has not previously received UP forbearance.

• Amount owed on firstmortgage equal to or less than $729,750.

• Mortgage originated on or before January 1, 2009.

• Is delinquent or default is foreseeable.

• Loan has not been previously modified under HAMP.

Borrower: Loan:


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From UP to HAMP Modification

• Minimum forbearance is 3 months, but may be extended at servicer discretion.

• Homeowner’s payment must be reduced to no more than 31% of gross income.

• Servicer may suspend homeowner’s mortgage payment in full.

• The UP Forbearance Plan Notice provides the effective date and other details about the Forbearance Plan.

Eligible homeowner enters forbearance period.



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From UP to HAMP Modification

• At least 30 days before forbearance expiration, servicer required to evaluate whether extension will be provided.

• Servicer provides Initial Package to homeowner at re‐employment or 30 days before UP forbearance expiration.

• Homeowner submits Initial Package for servicer evaluation for HAMP.

Servicer evaluates eligible homeowner for HAMP.



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Step #1for everyone!

Homeowner submits Initial Package for evaluation.

Steps to HAMP Modification

• Homeowner proactively seeks help from servicer or responds to servicer solicitation letter.

• Initial Package includes:–Request for Modification and Affidavit Form (RMA)

–Signed and dated 4506T‐EZ–Two most recent pay stubs and/or evidence of income

• Servicer evaluates income, debt, and hardship against eligibility criteria.


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HAMP Principal Reduction Alternative (PRA)

• Program enhancement addresses principal reduction.

• PRA gives participating servicers flexibility to offer principal reduction relief to homeowners whose homes are worth significantly less than they still owe (LTV 115%+).

• Servicers will be required to evaluate homeowners for PRA this Fall.

• Homeowners should not wait for PRA to become effective. PRA will be retroactive. Guidance forthcoming.

PRA offers some relief to underwater homeowners.


What if the homeowner is underwater?

PRA Effective Fall 2010

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Servicer calculates target modified payment.

Steps to HAMP Modification (PRA)

Servicer applies sequential steps “The Alternative Waterfall” to reduce monthly mortgage payment to 31% of gross (pre‐tax) income.

1.Capitalize outstanding interest, escrow advances, out‐of‐pocket servicing expenses (no late fees).

2.Cut interest rate to as low as 2%.

3.Extend loan term up to 40 years.

4.Defer portion of principal, interest‐free, until loan is paid off.

Servicer reduces UPB to reach LTV of 115% or target monthly mortgage payment at 31%.




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Servicer Applies Net Present Value (NPV) Test

Steps to HAMP Modification (PRA)• NPV test is complex, nonlinear mathematical model to analyze cost/benefit of investment decisions.

• If NPV test is positive on “The Standard Waterfall,”servicer must modify the loan.

• If NPV test is negative, servicer may modify the loan in accordance with investor guidelines.

• Homeowner can request review of NPV values if denied because of negative NPV test.

If NPV test is positive on “The Alternative Waterfall,” servicer may reduce principal in conjunction with HAMP modification.




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Successful trial becomes permanent modification.

HAMP Modification Reduces Principal

Homeowner in good standing receives principal reduction in thirds: one‐third per year for 3 years.

Homeowner in good standing who pays off loan (30+ days after effective) receives entire principal reduction.


• Homeowner who makes timely payments receives principal reduction of up to $5,000: $1,000 per year for 5 years.



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• Servicers may not refer homeowner to foreclosure until homeowner is determined ineligible for HAMP, or contact efforts have failed.

• Servicer may not proceed with foreclosure sale until homeowner determined ineligible, declines HAMP, or contact efforts have failed.

• Servicer’s attorney or trustee cannot conduct a foreclosure sale without written certification that a homeowner is not HAMP‐eligible.

• In most cases, if homeowner not approved, homeowner benefits from 30‐day waiting period before a foreclosure sale.

HAMP Protections Against Foreclosure

Designed to protect responsible homeowners from unnecessary and costly foreclosure actions.


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Creates comprehensive solution to achieving greater affordability.

2MP Overview

• Works in tandem with HAMP. When 1st lien modified, participating 2MP servicers must offer to modify 2nd lien.

• 2nd lien must have been originated on or before January 1, 2009.

• Homeowners who are delinquent must successfully complete 3‐month trial period.

• No new 2MP modifications after December 31, 2012.


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2MP works in tandem with HAMP.

2MP Modification Reduces Principal




• Homeowner who makes timely payments receives principal reduction of up to $1,250: $250 per year for 5 years.

• Servicers may extinguish 2nd lien; or extinguish part of 2nd lien and modify remaining unpaid principal balance.

Under PRA, when there is principal forbearance or reduction on 1st lien, participating 2MP servicer must forbear or forgive on 2nd lien in same proportion.

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HAFA provides more alternatives to foreclosure.

HAFA Overview

• Provides other foreclosure alternatives: Short Sale (SS), Deed‐in‐Lieu of foreclosure (DIL).

• Standardizes and simplifies process to improve execution.

• Offers benefits to proactive homeowners:

–Provides homeowner with $3,000 relocation assistance.

–Releases homeowner from future liability.

–Encourages cooperation from subordinate lien holders.



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HAFA Eligibility Criteria

Homeowner:

• Is owner‐occupant

• Property may be vacant <90 days if homeowner required to relocate 100+ miles for work

Loan:

• Amount owed on firstmortgage equal to or less than $729,750

• Mortgage originated on or before January 1, 2009

• First mortgage payment (PITI + homeowner association/ condo fees) is greater than 31% of homeowner’s monthly gross income


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FHA‐HAMP Overview

• Defers principal through partial claim; modifies remaining balance into 30‐year fixed‐rate loan.

• Provides affordable payment at 31% of gross monthly income.

• Homeowner who makes timely payments receives principal reduction of up to $5,000: $1,000 per year up to 5 years.

• For more information, call the National Servicing Center at 877‐622‐8525 or visit HUD.gov/offices/hsg/sfh/nsc/nschome.cfm.


Provides additional assistance to homeowners with FHA‐insured loans.



Hardest Hit Fund (HHF) ‐ Overview

• HHF supports innovative HFA programs that stabilize housing and help families avoid foreclosure. R1: $1.5B, R2: $600M, R3: $2B.

• Programs may include assistance to unemployed homeowners, principal reduction, funding to extinguish 2nd liens, and facilitation of SS, DIL.

• Designed to complement MHA or reach homeowners ineligible for MHA.

• Ten states received funding: AZ, CA, FL, MI, NV, NC, OH, OR, RI, and SC.

• Additionally eligible: AL, GA, IL, IN, KY, MS, NJ, TN, and DC.

HHF supports innovative programs developed by state HFAs to prevent foreclosures and stabilize housing markets.


HHF ‐Michigan

Michigan.gov/mshda

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Let’s Work Together

Together we can help more homeowners avoid foreclosure.

• Help promote upcoming MHA events.

• Encourage homeowners to apply.

• Ensure that homeowners submit all required documentation upfront.

• Direct homeowners to free resources:

–MakingHomeAffordable.gov

–1‐888‐995‐HOPE

–HUD.gov

–LoanScamAlert.org


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Access Program Information HMPAdmin.com

Homeowner Outreach

• Homeowner presentations

• Consumer brochures.

• Fact Sheets in English, Spanish, Portuguese, Chinese, Korean, Hmong, Tagalog and Vietnamese

• Web‐ready banner ads

Resources for Counselors and Trusted Advisors

• FAQs

• Presentations

• Escalation process details

Trusted advisors have easy access to MHA information and tools.


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Escalate Tough Cases HMPAdmin.com

Get help with cases that are difficult to resolve.


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Homeowners learn to identify scams. Enforcement is key

part of campaign.

Partner Toolkit provides resources for local

participation and promotion.

Information is available in multiple languages.

Fight Scams LoanScamAlert.org

Spread the word. Identify and report scams.


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Access Resources for Trusted Advisors

• HAMP Solution Center: 1‐866‐939‐4469, [email protected]

• Escalate cases to [email protected].

• FannieMae.com, 1‐800‐7Fannie

• FreddieMac.com, 1‐800‐Freddie, [email protected]

• Follow MHA progress at FinancialStability.gov.

• For FHA loans: 877‐622‐8525 or HUD.gov/offices/hsg/sfh/nsc/nschome.cfm.

Resources are in place to help you help homeowners


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Find the list of participating servicers at

www.MakingHomeAffordable.gov/contact_servicer.html.

Homeowners have easy access to MHA information and tools.

Find Program Info MakingHomeAffordable.gov


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Discussion/Questions

Thank You


Documents

Making Home Affordablecedamichigan.org/wp-content/uploads/2010/10/MHA-Round... · 2012-12-12 · or responds to servicer solicitation letter. • Initial Package includes: –Request