Understanding the Terms of a HAMP Modification: Interest ...€¦ · Life of Loan • Starting in year 6, Nick’s interest rate will rise 1% per year until market rate at time of

Making Home Affordable | May 2016Making Home Affordable | May 2016Making Home Affordable | May 2016

Understanding the Terms of a HAMP Modification:

Interest Rate Increase, Impact, and Resources Training Presentation for Trusted Advisors

2Making Home Affordable | May 2016

Agenda

Resources for Homeowners4

HAMP Overview1

HAMP Interest Rate Increase2

Impact to Homeowners3

Options for Homeowners with Additional Hardship5

Resources for Trusted Advisors6


1.6 MILLION

$41BILLION

$479.67MONTHLYSAVINGS*

HAMP OverviewProgram Highlights

Source: Making Home Affordable Program Performance Report Fourth Quarter 2015

Permanent HAMP modifications.

Median decrease in monthly housing payment under HAMP permanent modifications.

Estimated aggregate payment savings to homeowners who received HAMP 1st lien permanent modifications, to date.

*Excludes the impact of any interest rate increases and re-amortization of capitalized homeowner incentives which may begin to occur after the fifth year of the HAMP Tier 1 modification.


The Tier 1 Standard Modification

Waterfall is a stated order of successive

steps that must be applied until the

homeowner’s target monthly mortgage

payment ratio is reduced to 31% of his or

her gross income. STEP 1

Capitalization

STEP 2

Interest Rate Reduction

STEP 3

Term Extension

STEP 4

Principal Forbearance

HAMP Tier 1 Standard Modification Waterfall

HAMP Overview


• HAMP Tier 1 modifications included interest rate reductions to as low as 2% for the first five years to help homeowners avoid foreclosure.

• The terms of the HAMP Tier 1 modification include a gradual interest rate increase after five years.

• Homeowners in HAMP Tier 1 modifications will experience a gradual interest rate increase of 1% per year until their rate adjusts to the market rate at the time of their modification.

HAMP Interest Rate IncreaseUnderstanding the Terms of a HAMP Modification

Why are HAMP Interest Rates Increasing?

Homeowners with Fannie Mae or Freddie Mac owned HAMP loans who will experience a similar rate increase should contact Fannie Mae, Freddie Mac, or their servicer.

6Making Home Affordable | May 2016November 2009 l Making Home Affordable

2005: Nick buys $330,000 home

10% down payment

$297,000 mortgage (30 yr fixed at 6.5%)

2008: Income drops to $47,000 due to illness

HAMP Interest Rate IncreaseInterest Rate Increase Example

Target Monthly PITIA payment for HAMP is $1,214.

Nick’s Current Monthly Payment

Principal & Interest $1,877

Taxes $350

Insurance $105

Association Fee $75

Total Monthly Payment

$2,407

7Making Home Affordable | May 2016November 2009 l Making Home Affordable


HAMP Waterfall Current After HAMP

Step 1 Add $18,722 in unpaid interest and advances

$286,359

Unpaid Principal Balance

$305,131 UPB

Step 2 Reduce interest rate to 2% $2,407

monthly payment

(Principal, interest, taxes, insurance, association fees)

$1,650 PITIA

$1,644 PITIAStep 3 Extend term to 40 years

Step 4 Forbear $46,000 in principal $1,214 PITIA



Interest Rate

Pre-Mod: 6.5%

Interest Rate Increase

Year 7

After 3rd Increase: 4.9% (Fixed)

Year 6

After 2nd

Increase: 4%

Post-Mod Years 1-5

After 1st

Increase: 3%

Pre-Mod

Post-Mod: 2%

Total Monthly Payment

$2,407

$1,594

$1,476

$1,342

$1,214

Year 8 –Life of Loan

• Starting in year 6, Nick’s interest rate will rise 1% per year until market rate at time of permanent modification is reached.

• In year 8, the interest rate will increase to 4.9% and will be fixed for life of Nick’s loan.

• Nick saved $71,580 in the first five years.

• In year 7, the interest rate will increase to 4%.


HAMP Interest Rate IncreaseTimeframes

Offer

The first interest rate increase went into effect in Q3 2014 for the earliest group of HAMP modifications.

Source: Making Home Affordable Program Performance Report

Fourth Quarter 2015


HAMP Interest Rate IncreaseNumber of Increases and Payment Changes

Offer

Overall, 80% of HAMP Tier 1 homeowners will experience an interest rate increase after five years.

The majority of HAMP homeowners will experience two or three rate increases.

Homeowners who received a modification in 2009-2011 are more likely to experience three to four increases than homeowners who received a modification in 2012-2013, most of whom will experience two increases.

Number of Interest Rate Increases

The maximum rate depends on the market rate at time of modification.

For 92% of HAMP homeowners, this will result in a rate at or below 5%, well below the pre-modification interest rate.

The median amount of the first monthly payment increase is $93, and the median monthly payment increase after the final interest rate increase is $206.

Final Rate and Mortgage Payment

Sources: Treasury Notes Blog “HAMP Rate Reset: Just the Facts” (3/12/14) and Making Home Affordable Program Performance Report Fourth Quarter 2015


• General economic conditions are improving, particularly home price appreciation and job growth.

• Final interest rates are below pre-modification rates for most homeowners.

• However, there are factors that may impact a homeowner’s ability to accommodate the payment increase:

Improvement in the economy has been uneven, and

Homeowners may have experienced additional hardship since modification (i.e., increase in expenses or decrease in income).

• If a payment increase presents a challenge, homeowners should contact a housing counselor or their servicer immediately.

Impact to HomeownersMortgage Payment Changes

Economic Conditions


Communication Channels

Mortgage Servicer

• Homeowners may contact their mortgage servicer directly with questions regarding rate increases.

Servicer contact information on monthly mortgage pay stub For the list of participating HAMP Servicers and their contact

information, visit: http://www.makinghomeaffordable.gov/ get-started/contact-mortgage/Pages/default.aspx

Homeowner HOPE™ Hotline

• Homeowners may call the Homeowner’s HOPE™ Hotline to speak to live HUD-approved housing counselors or to escalate a case.

1-888-995-HOPE (4673)

Resources for Homeowners

Helping Homeowners Prepare


Requiring Explanation of Modification Terms Servicers to notify homeowners of the interest rate increase at time of modification.

Resources for HomeownersHelping Homeowners Prepare

What Treasury is Doing

Requiring Mandatory Advance NoticeServicers to provide homeowners with advance notice 120 - 240 calendar days and then 60 - 75 calendars day before first rate increase.

Requiring Financial CounselingLargest servicers in HAMP to offer financial counseling to assist homeowners in staying current on their mortgage payments.

Talking to Homeowners Treasury is collecting as much information as possible and monitoring all interest rate increases.

Training HOPE™ Hotline Call Centers Treasury to provide training to HOPE™ Hotline agents to prepare them to assist homeowners with rate increases.

Training Housing Counselors Treasury to provide training to housing experts that homeowners can turn to for help with preparing for the rate increases.

Providing Information via the Internet Treasury to post more information for homeowners on www.mha.gov and social media.

Working with Servicers Treasury to obtain input from servicers regarding the effect of rate increases on homeowners via Roundtable series.


MHA Programs

HAMP Tier 2

• Homeowners may be eligible for HAMP Tier 2 if they have a hardship caused by mortgage payment increases.

• HAMP Tier 2 modifications have an interest rate that is fixed for the duration of the loan.

• Servicers must proactively solicit a borrower for HAMP Tier 2 if that borrower loses good standing on their HAMP Tier 1 modification, or at such earlier time as required by applicable law. However, on or after September 1, 2016, a servicer must instead solicit such borrower for all loss mitigation options.

• A loan permanently modified under HAMP may be re-modified, without regard to the loss of good standing, provided that either:

The borrower has experienced a change in circumstance; or At least 12 months have passed since the HAMP Modification

Effective Date.

Streamline HAMP

• Homeowners who are at least 60 days delinquent within a 12 month period following an interest rate increase under HAMP Tier 1 may be eligible for Streamline HAMP, provided their servicer is participating.

Options for Homeowners with Additional Hardship


MHA and Treasury Programs

Home Affordable Foreclosure Alternatives (HAFA)

• Provides homeowners with a healthy transition to more affordable housing.

Homeowners sell their home as a “short sale” or transfer the title to the lender through a “deed-in-lieu of foreclosure.”

HAFA offers a more efficient process than a traditional short sale. Participating investors, servicers, and homeowners may be eligible

for incentives.

Hardest Hit Fund (HHF)

• If a homeowner lives in a state that is participating in Treasury’s HHF Program, additional assistance may be available via the state’s Housing Finance Agency.

For the list of HHF states and contact information, visit: https://www.makinghomeaffordable.gov/steps/Pages/step-2-program-hhf.aspx

Options for Homeowners with Additional Hardship


Name Contact Information

HAMP Solution Center • (866) 939-4469• [email protected]

Fannie Mae • (800) 2Fannie, select option 3• KnowYourOptions.com• [email protected]

Freddie Mac • (800) Freddie, select option 2 • FreddieMac.com

FHA LoansFHA National Servicing Center

• FHA National Servicing Center (877) 622-8525• HUD.gov/offices/hsg/sfh/nsc/nschome.cfm

USDA RHS LoanCentralized Servicing Center

• (800) 414-1226

VA Loans • (877) 827-3702• HomeLoans.va.gov

Resources for Trusted Advisors


Visit HMPadmin.com for official guidance, learning opportunities, newsletters, and more

Learn More About MHA


Webinars are conducted regularly on MHA program fundamentals, resources, and more.

Register today at HMPadmin.com

Register for MHA Training


Trusted advisors

escalate cases to

escalations@

HMPadmin.com

Follow up by

phone to

(866) 939-4469

Escalate Difficult-to-Resolve Cases


Includes program updates, outreach events, homeowner resources, plus learning and partnership opportunities

Subscribe to the MHA eNewsletter


Find information on MHA programs and participating mortgage companies.

Understand MHA OptionsVisit the NEW MakingHomeAffordable.gov


U.S. Department of the TreasuryHomeownership Preservation Office

Discussion/Questions

http://www.makinghomeaffordable.gov/learn-more/videos/Pages/default.aspx?vid=y7QrjafITuQ&#fragment-3

http://www.makinghomeaffordable.gov/learn-more/videos/Pages/default.aspx?vid=y7QrjafITuQ&#fragment-3

http://www.makinghomeaffordable.gov/learn-more/videos/Pages/default.aspx?vid=6n_nB-tJ6jo&#fragment-3

http://www.makinghomeaffordable.gov/learn-more/videos/Pages/default.aspx?vid=6n_nB-tJ6jo&#fragment-3

http://www.makinghomeaffordable.gov/learn-more/videos/Pages/default.aspx?vid=XbPaLHFHL7A&#fragment-1

http://www.makinghomeaffordable.gov/learn-more/videos/Pages/default.aspx?vid=XbPaLHFHL7A&#fragment-1

Documents

Understanding the Terms of a HAMP Modification: Interest ...€¦ · Life of Loan • Starting in year 6, Nick’s interest rate will rise 1% per year until market rate at time of