MHA Housing Power Point

"An Update on the

Making Home Affordable Plan"

“Saving one home at a time”

Meet Your PresenterCORA R. FULMORE

President of the Mortgage & Credit Center, LLC since 1997 and Co-Chair of NCHEC Advisory Board

MCC provides direct assistance in the area of:◦ Budgeting, money management, credit rebuilding, homeownership and

foreclosure prevention

More than 25 years of experience in the area of credit and mortgage counseling.

Certified trainer with NeighborWorks America, Freddie Mac, HUD, local & state government.

Host of the “Cora Fulmore Show” WOKB 1680 AM Station

Scheduled to appear on WHLV-TV 52 –Trinity Broadcasting Network

MCC also provide assistance to non-profits in the area of capacity building and program development.

Developed & Presented by the Mortgage & Credit Center, LLC

Take a look at the program’s success,

challenges and projections

To discuss recent changes to the Home

Affordable Refi and Mod Plan

Give a better understanding of the plan

from a housing counselor’s perspective

Review documentation requirements


Through August 2009, 47 loan service providers have offered

more than 570,000 homeowners loan modifications through the

(HAMP) program. Of these, 47 service providers have

successfully converted over 360,000 modifications. However,

the House Financial Services Committee, said they want to see

more conversion of trial offers from loan service providers —

namely 500,000 by November 1.


The Government is following up


August 09 Report

Source: http://www.treas.gov/press/releases/docs/

AUGUST REPORT

September 09 Report


Question

How has the MHA program impacted your

clients?

Overall, would you say that lenders are

working with you utilizing the program as

intended?


FLORIDA 8/09 – 62,401


Intent of the Plan

To get the economy and the housing market back on track

Comprised of the Home Affordable Modification and the Home Affordable Refinance Plan

Designed to insure long term sustainability.


What type of loans are eligible?

Home Affordable

Refinance

Is only available for

conforming loans

owned or securitized

by Fannie Mae and

Freddie Mac.

Home Affordable

Modification

Most conventional

loans including prime,

subprime, adjustable,

loans owned by lenders

and loans in securities

are eligible.


How do we get started?

1-800-7FANNIE or go to

www.fanniemae.com/homeaffordable

or

1-800-FREDDIE (8am to 8pm EST)

www.freddiemac.com/avoidforeclosure


Developed by www.onlinehousingtraining.com

Your client can help you help them…

Know who is participating

Fannie Mae and Freddie Mac

are required to participate

Private Investors and Servicers

participation is voluntary

As contracts are signed, a list

of participating servicers will be

available on the internet at

www.financialstability.gov


Program Updates


FHA HAMP


Making Home Affordable/FHA

Available for FHA loans that are at least one month delinquent, but no more than 12 months delinquent.

Homeowner cannot have intentionally defaulted.

Modification will be re-amortized over 30 years.

Mortgagee must give the mortgagor the opportunity to qualify for the program before proceeding with the foreclosure process


FHA-HAMP Partial Claim

Mortgagees can use a Partial Claim in order to reduce principal with the goal of achieving a 31% DTI for the mortgagor.

The maximum one-time only principal reduction on the modification is determined by multiplying the outstanding principal balance of the existing mortgage as of the date of default by 30 percent, reduced by arrearage amounts advanced to cure the default for up to 12 months PITI and allowable foreclosure costs.


FHA-HAMP Partial Claim Example

John and Anna – Reduction of income To fulfill the 31% Housing Ratio

Delinquent: 3 months

UPB: $150,000

Income: $3,500

Recurring

Debt: $800

New Payment: $1,085

Escrow & MIP $300

New PI: $785

Rate: 6% Assumption

New Mortgage: $130,931

Principle

Reduction: $19,069

Backend Ratio: 53.9%

• Payment: $1,220

• Escrow: $300

• P & I: $920

• Maximum principal deferment is $41,340 (30% of $150,000, less the $3,660 delinquency, or $45,000 - $3,660)

• Based on their gross income, mortgagor is eligible only for a principal deferment of $19,069 plus $3,660 arrearages (which would include any foreclosure costs incurred to that point, in accord with Mortgagee Letter 2008-21)

• Total Partial Claim of $22,729


Home Affordable Refinance

Freddie Mac

• Must be current

• 1st mortgage must be 125% or less of current market value

• 2nd lien holder MUST AGREE to subordinate

• Must obtain the refinance from the current servicer

Fannie Mae

• Must be current

• 1st mortgage must be 125% or less of current market value

• 2nd lien holder MUST AGREE to subordinate

• May obtain the refinance from any mortgage originator or current servicer


ENDS JUNE 10, 2010

Other Requirements

Owner occupied properties

Fully documented income to support the

new mortgage debt

No “cash out” allowed, (exception closing

costs)

If the CLTV exceeds 125%, all junior lien

holders must subordinate and the new LTV

must not exceed 125%


Documentation Needed Retirement funds disability

Death benefits

Unemployment benefits

Insurance policies

Income borrower can provide

reasonable documentation

Base wages

Salaries overtime

Commissions

Fees

Tips

Bonuses

Housing allowances

Annuities

Compensation for personal

services

Social Security payments

Pensions and any documented

income

•Hardship Affidavit / Imminent Default

•Most recent signed income tax return

•Proof of residency (e.g., current utility bill)

•IRS Form 4506-T

•Borrower’s monthly income documentation

•Credit report on each borrower

•Form 1126, Borrower Financial Statement

•Borrower’s other indebtedness (e.g., alimony)

•Property Value (AVM / BPO)


Refi Fact Sheet

Home Affordable Modification

The mortgage originated on or before January

1, 2009.

Loans modified under this program will have to

reduce the front end DTI to 38% by the lender

to comply with program guidelines

The US Treasury Department will then match,

dollar for dollar, further reductions to 31%

front end DTI for the borrower


Additional Criteria

The property must be owner occupied,

single family 1-4 unit property, no vacant

properties are eligible

The home must be a primary residence

and verified by prior years tax return or

current utility bill

First lien balances must be equal to or

less than $729,750


Net Present ValueThe NPV model used in the HMP takes into account the principal

factors that can influence the cash flow, including:

1. The value of the home relative to the size of the mortgage.

2. The likelihood that the loan will be foreclosed on.

3. Trends in home prices.

4. The cost of foreclosure including: legal expenses, lost interest

during the time required to complete the foreclosure action,

property maintenance costs, and expenses involved in reselling

the property.

5. The cost of the modification including:

• a lower monthly payment from the borrower,

• the likelihood the borrower will default even after the loan is

modified,

• financial incentives provided by the government, and

• the likelihood that a loan will be paid off before its term expires

(prepayment probability).


Servicers must perform the NPV Test at least twice:

1. When qualifying the Borrower for the Trial Period

2. When finalizing the Modification

If the NPV Test is Negative and principal forbearance is

needed to achieve the target payment, the mark-to-market

LTV ratio cannot be less than 100%.

If the mark-to-market LTV ratio is less the 100%, the

borrower can only qualify for HMP if the result is NPV

positive, ( there are some exceptions - Section C65.7(c)

If the NPV Test is Positive, the servicer will proceed with the

modification process

Net Present Value Test


Underwrite the Borrower:

Verifying Income/Target Payment Pay stubs - wage earners/profit &

loss (self-employed)

Signed complete copy of most recent tax return

All documented sources, includingrental income and unemploymentcompensation

Other documented income, if requested IRS Form 4506-T

Example:Gross monthly incomeMONTHLY INCOME: $4,000 x .31 = $1,240 Target PITIA(S)= shortage) payment

RAYMOND & PEARL

Income: $4,000.00

Max PITIA 31%: $1,240.00

Taxes 1/12: $ 200.00

Insurance 1/12: $ 120.00

Association Fee 1/12: $ 75.00

Net Principal & Interest: $ 845.00


MODIFICATION WATER FALL SYSTEM

1. Capitalization of Arrearages: Accrued interest, real estate taxes and other

arrearages (excluding late fees) may be capitalized and added to the principal

balance of the mortgage loan.

2. Interest Rate Reduction: First, the interest rate will be reduced (subject to a

floor of 2%) in increments of 0.125% in order to bring the monthly payment as

close to the target Front-End DTI level as possible without going below 31%.

3. Reamortization of Principal: Next, if the interest rate reduction has not

achieved the target Front-End DTI, the servicer shall extend the term of the

mortgage loan or the length of amortization, as applicable, to up to 40 years in

order to reach the target Front-End DTI ratio.

4. Principal Forbearance: Next, if the interest rate reduction and

reamortization have not achieved the target Front-End DTI, the servicer shall

set aside principal to reach the target Front-End DTI ratio.

5. Principal Forgiveness: While not a requirement under the standard waterfall,

servicers have the option to forgive principal at any point in the waterfall.


Chase, WaMu & EMC


Citi Mortgage

http://www.citigroup.com/citi/citizen/community/homeownershippreservation/


Program Updates

Further updates will be posted as

available at www.financialstability.gov


MHA Housing Power Point

Documents

Transcript of MHA Housing Power Point