First Lien Modification Program Home Affordable Modification Program. Phase 1 Engagement

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1 First Lien Modification Program Home Affordable Modification Program

2 Objective The objective of this three part training series is to assist servicers in the execution of the Home Affordable Modification Program or HAMP. At the completion of the HAMP training series, you will be familiar with: The borrower outreach and communication requirements The resources for additional guidance The process flow of the initial request, evaluation, underwriting, trial period plan, and permanent modification Please note that this presentation is not intended to replace the in-depth NPV, Waterfall and Reporting guidance set forth in the MHA Handbook for Servicers of Non-GSE Mortgages. 2

3 Overview HAMP is a central part of the Making Home Affordable Program, introduced in February 2009 to help stabilize the housing market and give struggling homeowners new opportunities to remain in their homes. By participating in HAMP, a servicer, investor and borrower are eligible for incentive compensation from the U.S. Department of the Treasury. HAMP participating servicers and investors perform modifications, possibly reduce losses, and help stabilize the United States housing market. Notes: The material in this presentation applies to mortgages not held by a Government Sponsored Enterprise or GSE (Fannie Mae and Freddie Mac). This presentation is directed to servicers who signed the SPA 3

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5 Agenda HAMP Eligibility Criteria Communication and Borrower Notices Protections Against Unnecessary Foreclosure Initial Package HAMP Process Underwriting Trial Period Plan Permanent Modification Alternative Loss Mitigation Options HAMP Documents and External Reporting Requirements 5

6 HAMP Eligibility Criteria 6

7 HAMP Eligibility Criteria To be eligible for HAMP the following criteria must be met: The mortgage loan is a first lien mortgage loan originated originated on or on before before January January 1, , The unpaid balance prior to capitalization must be lower than $729,750 for a one-unit property, $934,200 on two-, $1,129,250 on three-, and 1,403,400 on four-unit properties. The mortgage loan is secured by the borrower s principal residence and the property cannot be vacant or condemned. The mortgage loan is delinquent or default is reasonably foreseeable. The borrower documents a financial hardship and represents that he or she does not have sufficient liquid assets to make the monthly mortgage payments. The monthly mortgage payment (including principal, interest, taxes, insurance, and when applicable, association fees) prior to the modification must be greater than 31 percent of the borrower s verified monthly gross income. Additional guidance can be found in the Handbook located on HMPadmin.com 7

8 HAMP Eligibility Considerations The following are HAMP eligible: A borrower in active litigation. A borrower in active Chapter 7 or Chapter 13 Bankruptcy. A borrower discharged from Chapter 7 Bankruptcy and the mortgage debt has not been reaffirmed. A matured or maturing Balloon Loan. A borrower who is a primary beneficiary and trustee of an inter vivos Revocable Trust loan. Additional guidance can be found in the Handbook located on HMPadmin.com 8

9 HAMP Eligibility Criteria Continued Eligibility for HAMP Eligible Non-Eligible A borrower previously evaluated for HAMP who met the minimum eligibility criteria, but did not qualify for some financial reason (e.g. negative NPV result, excessive forbearance) or did not meet the minimum eligibility criteria for HAMP may request reconsideration at a future time if they experience a change in circumstance. A borrower is not eligible for HAMP reconsideration if, during a trial period plan (TPP), the borrower fails to make one or more payments by the last day of the month in which it is due. A borrower in a permanent HAMP modification who loses good standing is not eligible for a subsequent offer. Additional guidance can be found in the Handbook located on HMPadmin.com 9

10 Test Your Knowledge! To be eligible for HAMP a borrower must: A Have a current mortgage payment less than 31 percent of their monthly gross income B Be able to document a financial hardship C Be in foreclosure D Have a mortgage loan that originated after January 1,

11 Communication and Borrower Notices 11

12 Communication and Borrower Notices Borrower Solicitation Servicers must pre-screen and solicit all first lien mortgage loans, for which two or more payments are due and unpaid, that meet the HAMP eligibility requirements in addition to the following: Borrower Solicitation Not previously modified under HAMP Investor is willing to participate 12

13 Communication & Borrower Notices Over 30 Calendar Days A servicer must make a Reasonable Effort to contact an eligible borrower. A Reasonable Effort includes: At least four telephone calls to the last known phone number of record, at different times of the day. One letter via certified or express mail, or via an overnight delivery service like FedEx or UPS, with a return receipt requested; and One letter via regular mail. A Reasonable Effort for a borrower who receives Chapter 7 bankruptcy discharge who did not reaffirm their first lien mortgage includes: Four written notices to the last address of record. One of the written notices must be via certified or express mail, or via an overnight delivery service like FedEx or UPS, with a return receipt requested. Three letters via regular mail. Not required to make telephone calls. 13

14 Communication and Borrower Notices Right Party Contact When Right Party Contact is established, the servicer is required to Relationship Manager Successful efforts to communicate with the borrower or co-borrower about resolution of the delinquency is called Right Party Contact. Make sure all attempts to contact the borrower are documented in the servicing file. Transmit a written communication regarding the Initial Package. Advise borrowers that they may be eligible for HAMP. Clearly describe the Initial Package. Provide a toll-free telephone number. Identify any unique requirements. Make sure all attempts to contact the borrower are documented in the servicing file. The servicer must assign a relationship manager to a borrower immediately upon the successful establishment of Right Party Contact when it is determined that the servicer will consider the borrower for HAMP. The relationship manager will coordinate the servicer s actions to resolve the borrower s delinquency or imminent default and communicate those actions to the borrower. The Relationship relationship manager Manager must be able to respond to borrower inquiries, including inquiries regarding status of foreclosure, if the loan is referred to foreclosure. 14

15 Communication and Borrower Notices Over a period of 30 Calendar days Servicer must make a Reasonable Effort to solicit potentially HAMP-eligible borrowers. No Less than 15 Calendar days If Right Party Contact is made, the servicer must send a written communication to the borrower describing the Initial Package and include a date of no less than 15 calendar days to return the Initial Package. No Less than 30 Calendar days If the borrower does return the Initial Package, but it is incomplete, the servicer must send the borrower an Incomplete Information Notice and include a date of no less than 30 calendar days to return the documentation. An Additional 15 Calendar days If the documents are not received within the initial 30 calendar day period, the servicer must send a second Incomplete Information Notice allowing an additional 15 calendar days. Reasonable Effort Right Party Contact Acknowledgement of Initial Package Incomplete Information Notice An Additional 15 Calendar days If the borrower does not return the Initial Package, the servicer must resend the communication allowing the borrower an additional 15 calendar days to return the Initial Package. Within 10 Business days Servicer must acknowledge receipt of the Initial Package. After 45 Calendar days If the borrower is unresponsive to the servicer's written requests, the servicer may send the borrower a Non-Approval Notice. 15

16 Test Your Knowledge! A servicer is deemed to have made a Reasonable Effort to solicit a borrower by completing certain requirements. Over what period of time does the servicer have to meet the Reasonable Effort standard? A 15 calendar days B 10 calendar days C 30 calendar days D After 4 phone calls 16

17 Protections Against Unnecessary Foreclosure 17

18 Protections Against Unnecessary Foreclosure Suspension of Referral to Foreclosure & Scheduled Sale Suspension of Foreclosure Proceedings After a Foreclosure Sale Date Has Been Scheduled A servicer may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until at least one of the following circumstances exists: The borrower has been evaluated for HAMP and is ineligible. The borrower is offered a TPP, but fails to make current trial period payments. The servicer has established Right Party Contact, sent two written requests and the borrower failed to respond. The servicer has satisfied the Reasonable Effort solicitation standard without establishing Right Party Contact. The borrower or co-borrower states he or she is not interested in pursuing a HAMP. The servicer has resolved any applicable Escalated Cases. Also, a servicer may not refer any loan to foreclosure or conduct a sale if the borrower requested to be considered and is being evaluated for a Federally Declared Disaster (FDD), or during an FDD Forbearance plan. When a borrower submits a request for HAMP after a loan has been referred to foreclosure, the servicer must, immediately upon the borrower s acceptance of a TPP, take actions to halt further foreclosure activity. Servicers are required to suspend a scheduled foreclosure sale if a borrower submits a request for HAMP no later than midnight of the 7th business day prior to the sale date. Borrowers simultaneously in foreclosure and either being evaluated for HAMP or in a TPP, must be notified by the servicer in a written communication, of the concurrent modification and foreclosure processes. The notification must also state that the borrowers home will not be sold at a foreclosure sale while the borrower is considered for HAMP or in a TPP. Servicers must be able to certify that all other loss mitigation alternatives have been exhausted and a non-foreclosure outcome could not be reached. 18

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20 Resources Additional Resources Contact HAMP Servicer Integration Team E- mail: Resources located on HMPadmin.com include: Step-by-step job aids NPV tools and documents Reporting resources Live webinar training calendars 20

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