HOPE for Homeowners

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HOPE for Homeowners (H4H) Servicing
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• Servicing H4H Loans
• Preserving
• the Dream

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H4H Loan Servicers

• First mortgage serviced by holder/designee
• SEM and SAM mortgages serviced by
• U.S. Department of HUD
• c/o CL Service Corp./Morris-Griffin Corp.
• 2488 East 81st Street, Suite 700
• Tulsa, Oklahoma 74137

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H4H First Mortgage Servicing

• Standard FHA Requirements
• Loss Mitigation
• Prohibition on Subordinate Financing
• Refinance Restrictions

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H4H Loss Mitigation

• Home Retention Options
• Special Forbearance no change
• Modification HUD will subordinate SEM and SAM
• Partial Claim Subordination not required

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H4H Loss Mitigation

• Disposition Options
• Pre-Foreclosure Sale use existing ratios,
  2,000 allowance for lien payoff only available
  for preservation liens
• Deed-in-Lieu 2,000 allowance for lien payoff
  only available for preservation liens

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H4H Loss Mitigation

• Impact of 1st Payment Default
• Servicer must provide loss mitigation
• HUD unable to pay claim

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H4H Subordinate Financing

• 5-year prohibition on any
• subordinate financing
• except to
• preserve and protect the property

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H4H Subordinate Loan Requirements

• Only for health and safety or property
  deterioration
• No cosmetic or routine maintenance
• Cost must be reasonable
• Closed-end loans only no HELOCs
• Loan cannot reduce HUDs equity share
• CLTV to or less than 95 of new appraisal
• Contact NSC for approval

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H4H Refinance Restrictions

• No refinance in year 1
• No FHA streamlined refinance ever
• No refinance to reverse mortgage
• Limits on accessing equity and appreciation
• Any refinance must payoff SEM

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Equity Refinance

• Equity Refinance Only in Years 2 to 5
• 30 year/fixed with lower payments
• Proceeds must pay off HUDs equity share
• Only initial and earned equity can be used

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Equity Refinance Example

• Property value at origination 100,000
• Initial H4H loan balance 90,000
• Loan balance 3 years after orig. 89,000
• Property value after year 3 110,000
• Principal pay off 89,000
• Initial and earned equity 11,000
• Max refinance amount 100,000

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Equity Refinance Example (Contd)

• New PI must be lower than H4H mortgage
• 7,000 (70) of proceeds must be used to pay off
  SEM
• Borrower has 4,000 for transaction costs and
  proceeds
• No impact on SAM

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Appreciation Refinance

• Limited Appreciation Refinance After Year 5
• Cash out limited to initial and earned equity and
  25 of appreciation
• SAM modified to state fixed amount of
  appreciation due to HUD plus 50 of future
  appreciation

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Appreciation Refinance Example

• Property value at origination 100,000
• Initial H4H loan balance 90,000
• Loan balance in year 6
  88,000
• Property value year 6 120,000
• Principal pay off 88,000
• Initial and earned equity 12,000
• 25 of appreciation 5,000
• Max refinance amount 105,000

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Appreciation Refinance Example (Contd)

• 5,000 of proceeds must be used to pay off SEM
• Borrower has 12,000 for transaction costs and
  proceeds
• SAM modified to reflect 10,000 due to HUD plus
  50 of future appreciation

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Sale and Payoff of H4H Loans

• SEM and SAM must be paid on sale
• Closing agent sends payoff demand and appraisal
• NSC receives SEM/SAM proceeds
• NSC pays ASC holders in exchange for surrender of
  certificates

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H4H Equity Share Payoff

• Equity value at origination less H4H loan
  amount
• Sliding scale for equity share
• During Year 1 100 of equity due to FHA
• During Year 2 90 of equity due to FHA
• During Year 3 80 of equity due to FHA
• During Year 4 70 of equity due to FHA
• During Year 5 60 of equity due to FHA
• After Year 5 50 of equity due to FHA

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H4H Equity Share Payoff (Contd)

• Earned equity (decrease in loan balance) is
  property of the borrower unless net proceeds are
  not enough to pay FHAs share

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H4H Appreciation Share Payoff

• SAM due only on sale may not be paid earlier
• Appreciation net proceeds from sale less
  appraised value at origination
• Arms length transaction
• Limit on closing costs
• Credit for capital improvements

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H4H Capital Improvement Credit

• Appreciation reduced by 75 of cost of capital
  improvements if
• Cost was greater than 2,500
• Borrower can provide invoices
• Work significantly enhanced property value
• Cost was reasonable
• No interior décor, routine landscaping, or
  repairs
• No allowance for sweat equity

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H4H and Tier Ranking

• H4H loans will not be included in Tier Ranking
  Scores
• Tier 1 lender benefits will apply to H4H claims

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Monitoring H4H Servicers

• NSC will monitor H4H loans through
• Statistical analysis of lender default and FC
  rates
• Servicing Desk Reviews
• Referral to Quality Assurance/Mortgagee Review
  Board for noncompliance findings or failure to
  engage in loss mitigation

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H4H Servicing Help

• National Servicing Center
• FHA Call Center 1-800-Call FHA
• Policy Guidance hsg-lossmit_at_hud.gov
• Data Requests sfdatarequests_at_hud.gov