Federal Home Loan Bank of Des Moines

2019 Mortgage Conference

MPF Traditional: Default Management and Loss MitigationRory Cline, Senior Mortgage Analyst

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• Default Overview• Retention Options• Liquidation Options• Case Studies• Discussion

AGENDA

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DEFAULT OVERVIEW

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DEFAULT OVERVIEW

THE GOOD NEWS!• Delinquencies are well under the national average• Majority of loans in default have positive equity

“The number of seriously delinquent loans has

dropped to the lowest level we’ve seen since Sept.

2005”MPF Provider

PROGRAM RESULTS

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DEFAULT OVERVIEWPROGRAM RESULTS

MPF Conventional Delinquency

1.23%MPF REOs HAVE EQUITY

62%TOTAL CONVENTIONAL PORTFOLIO REO

.05%

MBA 4TH QUARTER

3.51%

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DEFAULT OVERVIEWIMPORTANT DEADLINES

DAY 36Good faith effort to contact

Single point of contact established-Written notice of the availability of loss mitigation

Property Inspection

Referral to an attorney

DAY 45

DAY 60

DAY 120

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DEFAULT OVERVIEWFORECLOSURE TIMEFRAMES

DON’T GET YOUR LOSS CLAIM CURTAILED!

USE THE CURRENT FANNIE MAE TIMELINE

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DEFUALT OVERVIEWDAYS FROM DEFAULT TO FORECLOSURE SALE

Non-Judicial

OR960

WA630

ID630

MT450

WY360

UT540

ND630

SD540

MN330

IA570

MO450

AK480

HI900

Judicial

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DEFAULT OVERVIEWCLAIMS

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DEFUALT OVERVIEWCLAIMS

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DEFAULT OVERVIEWInspections

PROPERTY INSPECTIONS

• Before the 60th day of delinquency• Every 30 days after until the

default is resolved• Report vancancy and ACT!

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DEFAULT OVERVIEWReporting the Delinquency

DEFAULT REPORTING• Codes and Dates are very important• Action Code vs. Delinquency Status

Code• Due by the 5th business day of each

month (MPF Traditional)

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DEFAULT OVERVIEWReporting the Delinquency

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DEFAULT OVERVIEWReporting the Delinquency

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RETENTION OPTIONS

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RETENTION OPTIONS7-STEP CALL FLOW

INTRO-DUCTION

—Introduce yourself &express empathy

PROBE

—Determineneeds &

desires based upon

customer situation

PRESENTSOLUTIONS

—Present

appropriate solution and

sell features &benefits

NEXT STEPS

—SPOC and customer

expectations

Consequence of inaction or

failure

CLOSE

—Gain

Commitment

SOFTCLOSE

—Customer

buy-In

Overcome objections

RECAP

—Read final

script & recap key points of

call

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56

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Source: FNMA KYOCC Training

What does the borrower want?

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RETENTION OPTIONSOffering a solution

FORBEARANCEPLAN

REPAYMENTPLAN

TEMPORARY LOAN

MODIFICATION

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RETENTION OPTIONSFORBEARANCE PLAN

FORBEARANCE

• Payment Relief: Reduced or Zero Payment

• Up to 3 months in length without prior consent of the Master Servicer

• Up to 12 months in length with approval of the Master Servicer

• It’s temporary and there needs to be a solution in place at the end

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RETENTION OPTIONSFORBEARANCE PLAN

WHEN DOES IT MAKE SENSE?

• Natural Disasters• Temporary Unresolved Hardships• Borrower has a Clear Plan

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RETENTION OPTIONSREPAYMENT PLAN

REPAYMENT

• Increase in monthly payment over a period of time to repay past due amounts

• Up to 3 months in length without prior consent of the Master Servicer

• Up to 12 months in length with approval of the Master Servicer

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RETENTION OPTIONSREPAYMENT PLAN

WHEN DOES IT MAKE SENSE?

• Temporary Resolved Hardships• The Increased Payment is

Affordable

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RETENTION OPTIONSTEMPORARY LOAN MODIFICATION

TEMPORARY LOAN MODIFICATION

• Temporary modification of the mortgage terms to bring the loan current

• Capitalization of interest arrearages• Temporary reduction in interest rate• No term extension• 36 month duration (potential to extend

an additional 36 months)• Potential Balloon Payment at maturity

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RETENTION OPTIONSTEMPORARY LOAN MODIFICATION

Upfront cash contributions if feasible

Capitalize the delinquent interest Amortize up

to 480 mo. from original note date Reduce the interest

rate in increments of 0.125% down to a floor of 3%

LOAN MODIFICATION WATERFALLThe goal is to hit a 31% Housing To Income (HTI) payment.31%

Not a term extension!

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RETENTION OPTIONSTEMPORARY LOAN MODIFICATION

WHEN DOES IT MAKE SENSE?

• Long term hardships• Borrower doesn’t have sufficient

income to support a repayment plan

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LIQUIDATION OPTIONS

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LIQUIDATION OPTIONSOFFERING A SOLUTION

SHORT SALE DEED-IN-LIEU

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LIQUIDATION OPTIONSSHORT SALE

SHORT SALE

• Sale of a property for less than is owed on the loan

• Low or no equity scenarios

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LIQUIDATION OPTIONSSHORT SALE

WHEN DOES IT MAKE SENSE?

• Borrower wants to exit gracefully• Property values have declined

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LIQUIDATION OPTIONSDEED-IN-LIEU

DEED-IN-LIEU

• Transfer of the property to the servicer• Avoidance of foreclosure• Private agreement• Requires Clear Title• No relocation/incentive payments

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LIQUIDATION OPTIONSDEED-IN-LIEU

WHEN DOES IT MAKE SENSE?

• Borrower wants to exit gracefully• Sale of property has been

unsuccessful

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CASE STUDY #1DECEASED BORROWER / CO-BORROWER

INTRO-DUCTION

—Introduce yourself & express empathy

PROBE

—Determine needs &

desires based upon

customer situation

PRESENTSOLUTIONS

—Present

appropriate solution and

sell features & benefits

NEXT STEPS

—SPOC and customer

expectations

Consequence of inaction or

failure

CLOSE

—Gain

Commitment

SOFTCLOSE

—Customer

buy-In

Overcome objections

RECAP

—Read final

script & recap key points of

call

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34

56

7

Source: FNMA KYOCC Training

RETAIN OR LEAVE?What is the current financial situation?• What are the income and non-housing expenses?• Do they expect any lump payments (i.e. life insurance)?

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CASE STUDY #1DECEASED BORROWER / CO-BORROWER

DETAILS

Desire to keep, can afford, can’t catch up• Expects a lump sum life insurance benefit? – short

term forbearance• Expecting a survivor benefit to increase income?

Short term forbearance followed by a repayment plan? Or a loan modification?

• No new income? Modification

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CASE STUDY #1DECEASED BORROWER / CO-BORROWER

DETAILS

Doesn’t want to keep property• Is there equity?• Yes? A forbearance to permit them time to sell

the property• No? A short sale• Borrower not in a position to market the

property/short sale offers not forthcoming? Deed in lieu

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CASE STUDY #2UNEMPLOYMENT

INTRO-DUCTION

—Introduce yourself & express empathy

PROBE

—Determine needs &

desires based upon

customer situation

PRESENTSOLUTIONS

—Present

appropriate solution and

sell features & benefits

NEXT STEPS

—SPOC and customer

expectations

Consequence of inaction or

failure

CLOSE

—Gain

Commitment

SOFTCLOSE

—Customer

buy-In

Overcome objections

RECAP

—Read final

script & recap key points of

call

12

34

56

7

Source: FNMA KYOCC Training

RETAIN OR LEAVE?What is the current financial situation?• What are the income and non-housing expenses?• Do they expect any lump payments (i.e. life insurance)?

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CASE STUDY #2UNEMPLOYMENT

DETAILS

Desire to keep, can afford, can’t catch up• Still unemployed but looking for work? – short term

forbearance• New job pays less but can afford? ModificationDoesn’t want to keep property

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IMPORTANT REMINDERSSUB-HEADING

Be familiar with the process before you speak to the borrower

Ask them what they want

Don’t overpromise or undersell

Be clear on the specifics –timeline to act

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Discussion

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VISIT OUR WEBSITEMPF.FHLBDM.COM

MPG GuidesComprehensive guide for the MPF Programs.

RESOURCESAvailable on the Resources

tab at our website

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Office

909 Locust StreetDes Moines, IA 50309

Phone

Office: 515.412.2283

Email / Website

rcline@fhlbdm.comwww.mpf.fhlbdm.com

STAY IN TOUCHRory Cline – Senior Mortgage Analyst