Making Home Affordable Working Together to Help Homeowners Working - PowerPoint PPT Presentation

Making Home Affordable Working Together to Help Homeowners Working Together to Help Homeowners November 2010 l Making Home Affordable

Response to the Crisis • Homeowner Affordability and Stability Plan MHA is part of boosts affordability and reduces foreclosures. Administration MHA is key. approach to • Supported the $8,000 Homebuyer Tax Credit, promoting which helped 2.5M families purchase homes. stability for housing market, • Provided almost $7B in support of homeowners. Neighborhood Stabilization Program to purchase, rehabilitate, sell, and rent foreclosed and vacant properties. • Created $7.6B HFA Hardest Hit Fund for innovative foreclosure prevention programs in nation’s hardest hit housing markets. 2 November 2010 l Making Home Affordable

Making Home Affordable Offers Help • Home Affordable Refinance Program (HARP) MHA and other • FHA Refinance for Homeowners with Negative Equity programs work (FHA Short Refinance) together to • Treasury/FHA Second Lien Program (FHA2LP) help • Home Affordable Modification Program (HAMP) homeowners – Home Affordable Unemployment Program (UP) avoid – Principal Reduction Alternative (PRA) foreclosure and • Second Lien Modification Program (2MP) revitalize • Home Affordable Foreclosure Alternatives (HAFA) housing. • Options for mortgages insured, guaranteed, or held by federal government agencies: – FHA (FHA ‐ HAMP), USDA’s RHS Special Loan Servicing (RD ‐ HAMP), and VA (VA ‐ HAMP) • Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF) 3 November 2010 l Making Home Affordable

HARP Overview Home • Helps homeowners unable to refinance due to Affordable declining property values. Refinance • Makes payments more affordable or more Program stable. (HARP) – Replace ARM, Option ARM etc. with fixed ‐ rate mortgage. – Reduce amortization term in order to build equity. • Extended through June 30, 2011. 4 November 2010 l Making Home Affordable

HARP Eligibility Criteria Loan: Homeowner: • Is current on the • Owned or guaranteed by Fannie mortgage Mae or Freddie Mac • Is owner ‐ occupant of a 1 ‐ • First mortgage cannot exceed 4 unit property 125% of property’s current market value • Has reasonable ability to pay the new mortgage • Refinance must improve payment affordability or sustainability 5 November 2010 l Making Home Affordable

Steps to HARP Refinance Homeowner • Homeowner determines basic eligibility at contacts lender MakingHomeAffordable.gov. to apply for • Homeowner owing more than 105% and up to HARP. 125% of home’s current market value contacts current lender to apply for HARP refinance. • Homeowner owing 105% or less of home’s current market value contacts any GSE ‐ approved mortgage lender to apply for HARP refinance. 6 November 2010 l Making Home Affordable

FHA Short Refinance Overview Provides • Provides homeowner who owes more than home additional value chance to refinance into FHA loan at no refinancing more than 97.75% of home value. option for • Lender writes down unpaid principal balance of 1 st lien by at least 10%. underwater homeowners. • Treasury provides incentives to participating servicers, investors who extinguish all or part of 2 nd lien. • Effective September 7, 2010 ‐ December 31, 2012. 7 November 2010 l Making Home Affordable

Scenarios of HAMP Modifications Program enhancements What if the homeowner is are designed to What if the unemployed? address a homeowner is Unemployment Program (UP) variety of struggling to make scenarios. the mortgage payment? What if the homeowner owes Home Affordable more than the home is worth? Modification Principal Reduction Alternative Program (HAMP) (PRA) 8 November 2010 l Making Home Affordable

HAMP Overview • Modifies 1 st liens for eligible homeowners to Home Affordable achieve more affordable or more stable Modification payments. Program –Helps homeowners keep their homes. (HAMP) –Reduces impact of foreclosure on communities. • Ends December 31, 2012. 9 November 2010 l Making Home Affordable

HAMP Eligibility Criteria Loan: Homeowner: • Amount owed on first • Has financial hardship and is mortgage equal to or less delinquent or at risk of than $729,750 default • Mortgage originated on or • Is owner ‐ occupant of 1 ‐ 4 before January 1, 2009 unit property • First mortgage payment (PITI • Has sufficient, documented + homeowner association/ income to support the condo fees) is greater than modified payment 31% of homeowner’s monthly What if the gross income homeowner is unemployed? Try UP. 10 November 2010 l Making Home Affordable

UP Overview Home • Any unemployed homeowner who requests Affordable assistance under HAMP must first be Unemployment considered for UP. Program (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. 11 November 2010 l Making Home Affordable

UP Eligibility Criteria Borrower: Loan: • Is owner ‐ occupant of 1 ‐ 4 unit • Amount owed on first property. mortgage equal to or less than $729,750. • Makes request before seriously delinquent (three months due, • Mortgage originated on or before January 1, 2009. unpaid). • Is unemployed at time of • Is delinquent or default is request and eligible for foreseeable. unemployment benefits. • Loan has not been previously • Has not previously received UP modified under HAMP. forbearance. 12 November 2010 l Making Home Affordable

From UP to HAMP Modification Eligible • Minimum forbearance is 3 months, but may be homeowner extended at servicer discretion. enters • Homeowner’s payment must be reduced to no forbearance more than 31% of gross income. period. • Servicer may suspend homeowner’s mortgage payment in full. • UP Forbearance Plan Notice provides the effective date and other details about the Forbearance Plan. 13 November 2010 l Making Home Affordable

From UP to HAMP Modification Servicer • At least 30 days before forbearance expiration, evaluates servicer required to evaluate whether extension eligible will be provided. homeowner for • Servicer provides Initial Package to homeowner HAMP. at re ‐ employment or 30 days before UP forbearance expiration. • Homeowner submits Initial Package for servicer evaluation for HAMP. 14 November 2010 l Making Home Affordable

Steps to HAMP Modification • Homeowner proactively seeks help from servicer Step #1 or responds to servicer solicitation letter. for everyone! • Homeowner submits Initial Package: – Request for Modification & Affidavit (RMA) Homeowner – Signed and dated 4506T ‐ EZ submits Initial Package for – Evidence of income evaluation. – Certification that homeowner not convicted of felony larceny, theft, fraud or forgery; money laundering; or tax evasion over last 10 What if the years. homeowner is • Servicer evaluates income, debt, and hardship underwater? Try PRA. against eligibility criteria. 15 November 2010 l Making Home Affordable

PRA Overview Principal • PRA was designed to help homeowners whose Reduction homes are worth significantly less than they Alternative owe (LTV 115%+) by encouraging servicers and (PRA) investors to offer principal reduction relief. • Principal reduction may lower re ‐ default risk for some loans. • HAMP ‐ participating servicers required to evaluate homeowners for PRA. • Each servicer required to develop guidelines around application of principal reduction. • Effective October 1, 2010 ‐ December 31, 2012. 16 November 2010 l Making Home Affordable

HAMP Steps to Modification Servicer applies the standard modification Servicer waterfall to reduce monthly mortgage payment calculates to 31% of gross (pre ‐ tax) income. target modified payment. 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. 17 November 2010 l Making Home Affordable

PRA Alternative Modification Waterfall For underwater homeowner (LTV 115%+), servicer Servicer must ALSO apply the alternative modification calculates waterfall to reduce monthly mortgage payment to target modified 31% of gross (pre ‐ tax) income. payment. 1. Capitalize outstanding interest, escrow advances, out ‐ of ‐ pocket servicing expenses (no late fees).  Servicer reduces UPB to reach LTV of 115% or If servicer forgives 5%+: target monthly mortgage payment at 31%.  Interest rate 2. Cut interest rate to as low as 2%. may exceed 2%.  Step 3 may 3. Extend loan term up to 40 years. precede Step 2. 4. Defer portion of principal, interest ‐ free, until loan is paid off. 18 November 2010 l Making Home Affordable

PRA NPV Test • NPV test is complex, nonlinear mathematical Servicer model to analyze cost/benefit of investment Applies Net decisions. Present Value (NPV) Test • If NPV test is positive on standard modification waterfall , servicer must modify loan. • If NPV test is negative, servicer may modify loan in accordance with investor guidelines.  If NPV test is positive on alternative modification waterfall , servicer may reduce principal with HAMP modification. • Homeowner can request review of NPV values if denied because of negative NPV test. 19 November 2010 l Making Home Affordable