Making Home Affordable. The Second Lien Modification Program (2MP) for Servicers

Transcription

1 Making Home Affordable The Second Lien Modification Program (2MP) for Servicers

2 Agenda Overview Eligibility Lien Matching Process Evaluation 2MP Modification Waterfall 2MP Trial Period 2MP Permanent Modification 2MP Partial Extinguishment 2MP Full Extinguishment Borrower Notices 2MP Reporting Requirements 2MP Incentive Compensation Resources 2

3 Overview: MHA Making Home Affordable programs help homeowners avoid foreclosure Transition from Home Ownership Historically Low Mortgage Interest Rates MHA Offers Solutions Breathing Room for Unemployed Help When You Owe More Than the Home is Worth More Affordable Payments 3

4 Overview: Helping More Homeowners Enhancements designed to provide relief to more homeowners and to accelerate housing market recovery. Expansion of Program Eligibility Extension of Application Deadlines MAKING HOME AFFORDABLE Help for More Homeowners Increase in Investor Incentives for Principal Reduction 4

5 Overview: 2MP Second Lien Modification Program (2MP) Core element of the MHA Program 2MP provides assistance to homeowners in a 1 st lien permanent modification who have an eligible 2 nd lien on the same property with a participating 2MP servicer. This assistance can result in a modification, or a full or partial extinguishment of the 2 nd lien. 2MP requires that a participating servicer offer a 2 nd lien modification if: The borrower s first lien is modified under non-gse or GSE HAMP or a qualifying GSE Standard Modification; The 1 st lien permanent modification is in good standing; and The borrower s 2 nd lien has an unpaid balance at initial consideration of $5,000 or more and a pre-modification scheduled monthly payment of at least $100. 5

6 Eligibility Criteria for Eligibility Second Lien Corresponding First Lien Not Previously 2MP Modified Unpaid Principal Balance (UPB) Limits Program Cut-off Date Originated on or before January 1, Must occupy the second lien position. Corresponding first lien must be permanently modified under: Non-GSE HAMP guidelines GSE HAMP first lien modification guidance GSE Standard Modification guidance Note: Corresponding first lien may not be modified under the GSE Streamlined Modification process. Corresponding first lien must be in good standing. Not previously modified under 2MP. At initial consideration: UPB is >= $5,000 Monthly payment >= $100. 2MP Effective Date must be on or before September 30,

7 Eligibility Loans that are Not Eligible First Lien Home Equity Loans and Lines of Credit A HEL or HELOC in first lien position is not eligible under 2MP and should be evaluated for HAMP. Partial Claim or Equity Appreciation Loan A second lien mortgage loan on which no interest is charged and no payments are due until the first lien is paid in full. Insured or Guaranteed by Federal Government Second lien mortgage loans that are insured, guaranteed or held by a federal government agency (e.g., FHA, VA, and RHS). Subordinate Mortgage Loan A mortgage loan that is subordinate to a second lien. 7

8 Eligibility Additional Factors Servicer Requirements The 2MP Servicer must: Have executed a Servicer Participation Agreement and related documents (SPA), plus have a schedule for 2MP participation. Determine that the borrower s 1 st lien is permanently modified under HAMP or qualifying GSE Standard Modification, and in good standing. Determine that the 2 nd lien meets eligibility requirements. When above criteria are met, the 2MP Servicer must: Offer to modify or extinguish the corresponding 2 nd lien in accordance with 2MP guidance. Dismiss any outstanding foreclosure action on the 2 nd lien. 8

9 Eligibility DTI Range If the 2MP Servicer s DTI Range under HAMP is narrower than the Expanded Acceptable DTI Range, the servicer may restrict 2MP eligibility to second lien mortgage loans with a corresponding first lien mortgage loan modified within the Servicer s DTI Range, or a broader range not to exceed the Expanded Acceptable DTI Range; provided that the restricted range not be narrower than the Servicer s DTI Range. If a 2MP servicer restricts 2MP eligibility in this manner, the servicer must apply this restriction consistently to all 2MP borrowers and document such restrictions in its written policies. 9

10 Lien Matching Process Matching Second Liens to Permanent First Lien Modifications Black Knight Financial Technology Services (BKFTS) First and Second Lien Matching BKFTS matching saves the 2MP servicer from verifying 1MP loan data and NPV analysis, and calculating loan terms by providing the structure for the 2MP offer. Efficiencies of BKFTS Matching 2MP servicers may rely on the first lien permanent modification data provided by BKFTS and are not required to: Verify financial information Perform NPV analysis Obtain Dodd-Frank and occupancy certification (if a non-gse match)* *If 2 nd lien is matched to: GSE HAMP Modification The 2MP servicer is obligated to obtain: Dodd-Frank certification GSE Standard Modification Dodd-Frank certification plus occupancy certification 10

11 Lien Matching Process BKFTS Database Matching for Second Liens to Permanent First Lien Modifications Second Lien BKFTS Database Matches First and Second Lien Data Permanent First Lien MP servicer provides second lien loan and borrower information: Loan Identifying Information Borrower/ Co-borrower Identifying Data Property Identifying Data 2MP Servicer Contact Information File indicates: Whether second lien corresponds to an existing first lien Whether first lien is HAMP or GSE modified and in good standing First lien modification details (interest rate, term length, forbearance / forgiveness) MHA Program Administrator (Fannie Mae) provides 1MP loan and borrower information: Loan Identifying Information Borrower/ Co-borrower Identifying Data Property Identifying Data 11

12 Lien Matching Process BKFTS Match Timeline Where a BKFTS match is found, servicer must offer a 2MP trial period or 2MP modification no later than: Step 1 Step 5 (Phase III) FIRST MATCH FILE 150 calendar days From The Date of First Match in the first match file containing matches to GSE Standard Modifications. ALL OTHER MATCH FILES 60 calendar days If a borrower is in bankruptcy: From The Date of First Match for the related permanent modification. 60 calendar days From the latter of: 1) The date the borrower, borrower s counsel, or the bankruptcy trustee requests consideration for a 2MP modification; or 2) The date the 2MP servicer receives BKFTS match notification. Note: Servicers should extend time frames as necessary to accommodate dates in obtaining required court and/or trustee approvals per local court rules and procedures. Servicers must record the date when they obtained information from BKFTS to use for the 2MP modification 12

13 Evaluation 2MP Servicer Solutions When a borrower s first lien is HAMP or GSE modified and the servicer of the second lien is a 2MP participant, that servicer must evaluate the second lien and offer one of the following solutions. Solutions include: MODIFY the borrower s second lien using the standard 2MP modification steps and mirror the structure of the HAMP or GSE modified first lien. PARTIALLY EXTINGUISH the second lien in exchange for a lump sum payment from Treasury and then MODIFY the remaining balance. FULLY EXTINGUISH the second lien in exchange for a lump sum payment from Treasury. 13

14 2MP Modification Waterfall Overview STANDARD WATERFALL SECOND LIEN TYPE FULLY AMORTIZING INTEREST ONLY PARTIALLY AMORTIZING Capitalization Reduce 1 Interest 3 Capitalize accrued interest and servicing advances Capitalize using the same process for all 2 nd lien types 2 4 Reduce the borrower s interest rate REDUCE 2MP Modification Protocol INTEREST Extend Term Extend the term without exceeding 480 months Forbear or Forgive If necessary, forbear or forgive principal Reduce Reset Mirror 1 st lien term Forgive/forbear in same proportion as the 1MP Convert Reset -or- Reduce Reset Apply appropriate guidance Reset Servicer Discretion Investor Guidelines To help borrowers achieve greater affordability, 2MP gives servicers discretion to offer terms more generous than the standard waterfall terms. Investor guidelines may prohibit or limit a servicer from performing the 2MP modification protocol. In this case, the servicer must request an exception or perform the modification within the limitations of the law and/or investor guidelines. 14

15 2MP Modification Waterfall Fully Amortizing Loans STANDARD WATERFALL SECOND LIEN TYPE FULLY AMORTIZING Capitalization Reduce 1 Interest 3 Capitalize accrued interest and servicing advances Capitalize accrued interest and servicing advances paid to third parties in the ordinary course of business and not retained by the 2MP servicer. 2 4 Reduce the borrower s interest rate REDUCE 2MP Modification Protocol INTEREST First five (5) years: Reduce to 1.0% Interest rate reset After 5 years, reset the interest rate to mirror the interest rate and schedule of the 1st lien, or apply a more gradual interest rate step-up. The 2MP interest rate may not exceed that of the modified 1 st lien. Extend Term Extend the term without exceeding 480 months Extend 2 nd lien term to mirror 1 st lien term. Amortize the modified UPB of the 2 nd lien over the modified term. If term extension is not permitted, re-amortize the 2 nd lien with a balloon payment due at maturity. Forbear or Forgive If necessary, forbear or forgive principal Forgive/forbear 2 nd lien in at least the same proportion as the 1 st lien. Servicer Discretion May waive or defer accrued interest. May exercise discretion in offering a lower rate. May extend2 nd lien beyond 1 st lien term length, up to 40 years. May forbear/forgive more than proportionate amount. 15

16 2MP Modification Waterfall Example: 2MP Guidance Relating to Interest Rates Interest Rate 6.5% Rate Cap Year 7 Remainder of term Modified First Lien Structure 6.0 % Increase Year 6 5.0% Fixed Years 1-5 Modified Second Lien 6.5% Rate Cap 6.0 % Increase Year 6 1.0% Fixed Years 1-5 Year 7 Remainder of term Reset after 5 years to mirror 1st lien terms 16

17 2MP Modification Waterfall Interest Only Loans STANDARD WATERFALL SECOND LIEN TYPE INTEREST ONLY Capitalization Reduce 1 Interest 3 Capitalize accrued interest and servicing advances Capitalize accrued interest and servicing advances paid to third parties in the ordinary course of business and not retained by the 2MP servicer. 2 4 Reduce the borrower s interest rate REDUCE 2MP Modification Protocol INTEREST First five (5) years: Convert I/O payments to amortizing at 1.0%; or Retain I/O payment schedule and reduce to 2.0% Interest rate reset After 5 years, reset to mirror the 1 st lien, or apply a more gradual interest rate step-up. The 2MP interest rate may not exceed that of the modified 1st lien. Extend Term Extend the term without exceeding 480 months Extend 2 nd lien term to mirror 1 st lien term. Begin amortizing at original 2 nd lien date or after year 5, whichever is later. If term extension is not permitted, re-amortize the 2 nd lien with a balloon payment due at maturity. Forbear or Forgive If necessary, forbear or forgive principal Forgive/forbear 2 nd lien in at least the same proportion as the 1 st lien. Servicer Discretion May waive or defer accrued interest. May exercise discretion in offering a lower rate. May extend2 nd lien beyond 1 st lien term length, up to 40 years. May forbear/forgive more than proportionate amount. 17

18 2MP Modification Waterfall Partially Amortizing Loans STANDARD WATERFALL SECOND LIEN TYPE PARTIALLY AMORTIZING Capitalization Reduce 1 Interest 3 Capitalize accrued interest and servicing advances Capitalize accrued interest and servicing advances paid to third parties in the ordinary course of business and not retained by the 2MP servicer. 2 4 Reduce the borrower s interest rate REDUCE 2MP Modification Protocol INTEREST First five (5) years: If >= 50% amortizing, follow fully amortizing guidance. If < 50% amortizing follow I/O guidance. Interest rate reset After 5 years, reset to mirror the 1 st lien, or apply a more gradual interest rate step-up. The 2MP interest rate may not exceed that of the modified 1 st lien. Extend Term Extend the term without exceeding 480 months Extend 2 nd lien term to mirror 1 st lien term. If >= 50% is currently amortizing, follow fully amortizing guidance. If < 50% is currently amortizing, follow fully amortizing guidance or I/O guidance. Forbear or Forgive If necessary, forbear or forgive principal Forgive/forbear 2 nd lien in at least the same proportion as the 1 st lien. Servicer Discretion May waive or defer accrued interest. May exercise discretion in offering a lower rate. May extend2 nd lien beyond 1 st lien term length, up to 40 years. May forbear/forgive more than proportionate amount. 18

19 2MP Trial Period When is the Trial Period Required? Not Required Required If the second lien payment is current, AND Current payment is greater than or equal to the modified 2MP payment: The 2MP modification may be executed immediately following the permanent modification of the first lien. If the second lien payment is delinquent at the time of the 2MP offer (two or more payments due and unpaid): Borrower must complete a 2MP trial period with payments reflecting the terms of the proposed 2MP modification. 19

20 2MP Trial Period General Guidelines Acceptance Duration Due Dates Timely receipt of first payment indicates acceptance If no receipt: 2MP offer can be withdrawn; servicer no longer obligated to modify the second lien. Servicer must send borrower notice of ineligibility if withdrawn. At least three (3) months in duration. May run concurrently, overlap, or be longer than the 1 st lien trial period, depending on whether the 2MP servicer also services the 1 st lien. Due date for trial period payment may be any day of the month. Due date on modification agreement must be the first day of the month. Payments Timely payments: Must be received no later than 30 calendar days from due date. Early payments do not affect length of trial period or accelerate a 2MP modification effective date. Late payments: Servicer may accept based on business judgment. Amounts Trial payments: held as unapplied funds until equal to a full contractual payment. Remaining funds: Apply to reduce amounts to be capitalized as part of the modified principal balance. 20

21 2MP Permanent Modification Conditions Offer Offer The 2MP modification offer must be made after the first lien modification is effective. The first lien permanent modification must be in good standing. Final 2MP terms must match the final terms of the permanent first lien modification. Agreement The modification agreement must be signed within 30 calendar days from the date of the permanent modification offer. Effective Date After permanent modification of the corresponding first lien becomes effective; When the borrower has made all required 2MP trial period payments. 21

22 2MP Permanent Modification Conditions (continued) Offer Re-Subordinate Junior Liens 2MP servicers must re-subordinate junior liens within their servicing portfolio to facilitate modification of the first lien under HAMP. Lien Release When servicer utilizes partial or full extinguishment: Servicer, investor, and any mortgage insurance company must relinquish all rights and remedies against borrower. Borrower cannot be required to sign a promissory note or be charged a fee. If full extinguishment, servicer must cancel the indebtedness and release the second lien in a timely manner. Closed-end Second Liens If second lien is an open-end line of credit, servicer must terminate the borrower s ability to draw additional amounts. 22

23 2MP Permanent Modification Conditions (continued) Offer Mortgage and Other Insurer Approval When servicing on behalf of an investor, the 2MP servicer must notify investor so that the investor can obtain a blanket delegation of authority from mortgage insurers to modify and/or extinguish 2MP liens. Assignment to MERS If 2 nd lien is assigned to MERS as mortgagee of record, the 2MP servicer must ensure the 2MP modification agreement contains the correct language regarding MERS s rights with respect to the loan. 23

24 2MP Permanent Modification Special Considerations Scenario Guidance Default If a borrower defaults and the 2MP modification loses good standing Note: The 2MP may not previously have been in default Loan permanently loses eligibility for 2MP servicer and borrower incentives and reimbursements. Servicer and borrower incentives cannot be restored, even if borrower fully cures the delinquency or the corresponding first mortgage lien is subsequently re-modified. The second lien is not eligible for another 2MP modification or extinguishment. A servicer may not re-modify a loan that has received a 2MP modification until either: the 2MP loan has lost good standing; or more than five years have passed since the effective date of the 2MP modification. 24

25 2MP Permanent Modification Special Considerations (continued) Scenario Guidance Principal Curtailment If a principal curtailment is made on a 2MP modification that includes principal forbearance If curtailment amount is less than the interest bearing UPB, Apply the funds to the interest-bearing UPB. If curtailment amount is greater than or equal to the interestbearing UPB, apply the funds in this order: First to principal forbearance portion; if funds remain, then Apply to the interest-bearing UPB. Reinstatement of 2MP compensation If a 2MP modification is associated with a 1 st lien modification that loses good standing and is subsequently re-modified, the 2MP may be reinstated and its compensation resumed without changing its terms. 25

26 2MP Partial Extinguishment Overview Protocol Availability Partial extinguishment may be used in conjunction with a 2MP modification. To achieve an affordable monthly payment, 2MP servicers can elect to partially extinguish principal on the second lien and then modify the remaining unpaid balance. Conditions Availability of partial extinguishment depends on: Investor guidelines allowing such an arrangement; The outstanding UPB of the second lien at initial consideration must equal or exceed $5,000; and The pre-modification monthly payment on the second lien must equal or exceed $100. In Lieu of Interest Rate Reduction A servicer may also elect to use partial extinguishment instead of interest rate reduction in the 2MP modification waterfall to achieve an affordable monthly payment. See the Handbook for guidance regarding minimum/maximum lien and monthly payment amounts, and interest rates. 26

27 2MP Full Extinguishment Overview Protocol Availability Full extinguishment is available as an alternative to modification. 2MP servicers can elect to fully extinguish the entire second lien in exchange for a lump sum payment from Treasury. Conditions Full extinguishment is subject to investor guidelines. Applicability 2MP servicer, at their discretion, may fully extinguish second liens regardless of whether: The outstanding UPB is greater than or equal to $5,000; or The pre-modification monthly payment is greater than or equal to $100. Timing The corresponding first lien must be permanently modified and in good standing. Lien Release Servicer, investor and mortgage insurer must relinquish all rights and remedies against the borrower(s). See the Handbook for guidance regarding lien and monthly payment amounts. 27

28 Borrower Notices 2MP Modification will NOT be offered Timing If the 2MP servicer had contact with the borrower and determines that a modification will not be offered, the servicer must mail notice to the borrower no later than ten (10) business days after the determination. Content Notice must be written in clear, non-technical language, with acronyms and industry terms explained in a manner that is easily understandable. Notice must describe reason(s) why the borrower is not eligible. Details may vary depending on the information intended to be conveyed or the determination made by the 2MP servicer. Notification Method Mail; or Electronic (if previously agreed to by the borrower) 28

29 Borrower Notices Interest Rate Step-Up Servicers must: Provide notice to 2MP borrowers at least 120 calendar days, but no more than 240 calendar days, before the first payment is due at the first adjusted level. Send an additional notice calendar days before the first payment is due at the first adjusted level. Send notice for subsequent adjustments at least 60 calendar days, but no more than 120 calendar days before the first payment is due at the subsequent adjusted level. Notices must include: A statement outlining that the interest rate on the second lien: 1. Will reset to the then-current interest rate on the modified first lien; 2. Will reset on the same terms and schedule as the modified first lien until reaching the interest rate cap of modified first lien; and 3. Once reaching the cap, will remain fixed for the remaining life of the loan. The amount and effective date of the interest rate increase and the amount and due date of the homeowner s first increased monthly payment at the new adjusted level; A table with the payment schedule outlining the future interest rates, monthly payment amounts and effective dates; and Telephone numbers: Servicer must provide a telephone number for borrowers to call for questions or concerns about their new payments and provide the telephone number for the HOPE Hotline. 29

30 2MP Reporting Requirements HAMP Reporting Tool Loan-level reporting requirements are posted on 2MP trial modification reporting is not required. One-time set up is required in the HAMP Reporting Tool for 2MP modifications and extinguishments. Official Monthly Reporting (OMR) is required on a monthly basis to include monthly loan activity and loan identifying information. Credit Bureau Reporting full-file status report is required. For additional 2MP reporting details, visit 30

31 2MP Reporting Requirements 2MP Official Monthly Reporting 2MP servicers are required to report activity in the HAMP Reporting Tool until the earliest of the following occurs: the 2MP loan loses good standing and the associated first lien either loses good standing or is paid off; the 2MP loan is paid off; the 2MP loan is cancelled in the HAMP Reporting Tool, in accordance with MHA guidelines; or the 2MP is re-modified outside of MHA. 2MP servicers must not cease reporting for the 2MP if the first lien loan loses good standing or is paid in full. Note: 2MP servicers must not cease reporting for the 2MP if the first lien loan loses good standing or is paid in full. 31

32 2MP Incentive Compensation Overview Eligibility Borrowers Servicers Investors Conditions 2MP servicer must have executed the SPA and 2MP service schedule. 2MP servicer has not yet reached its MHA Program Participation Cap. For successful completion of: Modification Partial Extinguishment Full Extinguishment Borrower must qualify for, or otherwise enter into, a permanent 2MP modification. Loan must be reported through the HAMP Reporting Tool. 32

33 Resources Additional Resources HAMP Solution Center: HAMP Servicer Integration Team fanniemae.com HMPadmin.com Programs Learning Center Resources News Contact Us 33

34 Discussion/Questions Thank You 34