Home Affordable modification Program (HAMP) Making Home Affordable (MHA)

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Home Affordable modification Program(HAMP)Making
Home Affordable (MHA)

• William Tanner Patrick Ulibarri

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History

• On March 8th 2009, The Home Affordable
  Modification Program (HAMP) also known as Making
  Home Affordable (MHA) was announced and was
  designed to help 3 to 4 million homeowners avoid
  foreclosure.
• The program was set up to provide clear and
  consistent loan modification guidelines that the
  entire mortgage industry could use.
• HAMP required, that If a servicer took part in
  TARP II bailout funds, they had in fact,
  pre-agreed to sign on to this program.

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Define Servicer/investor

• Servicer Chase, BofA, Citi, Wells Fargo, Ocwen,
  Aurora, etc
• Investor Fannie Mae, Freddie Mac, WFMBS 2007-AR6
  (REMIC)
• Most of the time a servicer is not the investor

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Non-GSE PSA

• Pool
• Pooling and servicing agreement (PSA)
• Trustee of Pool
• Modification provisions

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Servicer/investor incentives

• Loss sharing between 38 and 31 of a reduced
  payment
• Paid for every modification completed
• Paid for every year homeowner pays on-time

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Qualifying

• 1) Borrower is delinquent on their mortgage or
  faces imminent risk of default resent in 120
  days, less than 3 months PITI resrves (GSE loss
  of job, Divorce, death of a spouse, fraud)
• 2) Property is occupied as borrower's primary
  residence
• 3) Mortgage was originated on or before Jan. 1,
  2009
• 4) Unpaid principal balance must be no greater
  than 729,750 (one-unit) 934,200 (two-unit)
  properties.
• If 1 through 4 meet terms, the next step is to
  see if the loan is modified, will it lower the
  payment?

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PITIA

• 1st mortgage principal and interest
• Monthly Property Tax Proration
• Monthly Property Hazard Insurance Proration
• Home Owners Association Dues/Assessment

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31 lower or higher?

• Present situation has a PITIA of 2,000 (A)
• Household Gross Income is 5,000.00 (B)
• 31 of 5,000.00 is 1,550.00 (C)
• If (A) is greater than (C) the homeowner passes
  the first test
• In this case the home owners PITIA payment would
  need to be reduced to a target 1,550.00.
  450.00 per month savings.
• Servicer has three tools to reduce the the
  payment to 31

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Income Calculation

• All household sources of income can be used, if
  they can be documented
• Types Pay-stubs, Profit Loss, Award Letters,
  boarder rents, leases, non-mortgagee contribution
  (spouse, child, etc), child/spousal support
• Non-taxable income will be grossed up 125 (100
  125 after gross up)
• Rental/Boarder income will be calculated at 75
  (100 75 after calculation)
• Rents/Boarder income will need to have been on
  tax return previous year
• Self-Employment should be 18 months min duration
• Pay-stubs with overtime will be averaged YTD
• Unemployment (discussed later)

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New unpaid principal balance

• It is important to know the loans present
  principal balance and the amount of past due
  interest and impounds, if any. (late fees are
  waived)
• By combining these amounts you will get the
  loans new unpaid principal balance

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Waterfall

• The servicer will take the UPB and subject it to
  the following waterfall test.
• First, reduce the interest rate by .125 to as
  low as 2,
• Next, if necessary, extend the loan term to 40
  years,
• Finally, if necessary, forbear (defer) a portion
  of the principal until the loan is paid off and
  waive interest on the deferred amount.
• Note Servicers may elect to forgive principal
  under HAMP on a stand-alone basis or before any
  modification step in order to achieve the target
  monthly mortgage payment.

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Net Present Value (NPV)

• If the waterfall reaches the target 31 PITIA
  payment, a NPV test will be run.
• NPV is a proprietary tool created by the US
  Treasury Dept. to determine if the investor will
  make more money by foreclosing (FAILD NPV) or if
  the investor will make more money by modifying
  the loan (PASS NPV) under the HAMP guidelines.
• If there is a failed NPV test the servicer must
  send a non-approval notice to the homeowner
  within 5 days of the NPV Fail, providing the 33
  inputs used on the NPV test. There is a 30 day
  window to dispute any inaccurate inputs. The
  servicer cannot foreclosure during this dispute
  period.

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The Process

• Call in financials and servicer will see if you
  pass the initial guidelines SEND IN RMA ANYWAY
  from HAMP website
• If it passes, the servicer sends out a HAMP
  package incl an RMA form, 4506-T and a list of
  documents to support income, prove occupancy and
  hardship
• Once the servicer receives the documents they
  will check to make sure all items necessary to
  process the package were submitted
• If more documents are needed a 30 day letter will
  be sent and then a 15 day letter
• Once all documents are received the file is sent
  to a negotiator (single point)
• Escrow info is obtained internally to get updated
  UPB

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The Process (cont)

• Now a formal NPV test is run with verified info
• If it passes, a 3 month trial plan will be sent
• If it fails, a non-approval letter must be sent
  within 3 days and the homeowner will have 30 days
  to dispute any of the 33 inputs used. If the
  home value is questioned, it can be disputed for
  a upfront fee for an appraisal (around 200).
• Once in a trail plan the only reason for denial
  should be if the homeowner does not make the plan
  payment on time.
• After the trail is complete, a final offer is
  sent to be signed and sent back.
• After 1st finalized payment is made the fully
  executed mod is sent back to homeowner for
  records.

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Protections

• The foreclosure process should be suspended while
  in review. Every servicer has a different
  definition of what review means.
• No foreclosure sale until the HAMP review and
  in-house mod review are completed
• Can apply up to 5 days before a trustee sale
• Notices must be sent to homeowner 30 day, 15
  day, non-approval 30 day

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4(.5) types of HAMP/MHA

• Non-GSE
• Fannie Mae
• Freddie Mac
• FHA/VA
• Unemployment HAMP/MHA

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On the Web

• HAMP https//www.hmpadmin.com/portal/index.jsp
• NPV Test https//checkmynpv.com/
• Servicer List http//www.makinghomeaffordable.gov
  /get-assistance/contact-mortgage/Pages/default.asp
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