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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34
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
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 #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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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
STAY IN TOUCHRory Cline – Senior Mortgage Analyst
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