The Wind Down of HAMP

Transcription

1 Center fr NYC Neighbrhds May 2016 Curina Yulisa The Wind Dwn f HAMP This infrmatin was taken frm a Treasury webinar with Empire Justice Center. Check ut Empire Justice Center s webinar recrding n the MHA Prgram Wind Dwn n their HOPP prtal at Wind Dwn Guidelines: The Cnslidated Apprpriatins Act f 2016 requires terminatin f MHA prgrams n December 30, 2016, with an exceptin fr certain applicatins made befre that date. Timeline: Guidance issued March 3, 2016 (Supplemental Directive 16-02) cvering the prgram end dates and requirements arund cnsideratin r evaluatin f hmewners wh request assistance prir t end date. Additinal guidance issued May 2, 2016 (Supplemental Directive 16-03) cvering ther key prgram cmpnents (SPOC, escalatins, pst mdificatin cunseling, etc.). Majrity f guidance will remain in effect thrugh 2017 r lnger. FHA HAMP is a permanent prgram and will nt be ending. GSE: the Standard Mdificatins will still be available. May 1, 2016 UP: servicers can begin t ffer prprietary frbearance plans ahead f UP effective May 1, 2016 December 30, 2016 HAMP: HAFA: Initial package (des nt need t cnstitute a cmplete package fr evaluatin) submitted by December 30, 2016 Apprved ffer f a sale r pre-apprval with the terms f the listing agreement r shrt sale n r befre December 30, 2016 UP: Frbearance Plan apprved by December 30, MP: Same with HAMP GSE HAMP: Cmplete lan mdificatin applicatin must be received n r befre December 30,

2 Center fr NYC Neighbrhds May 2016 Curina Yulisa SPOC: Servicers are n lnger required t assign relatinship managers (RM) t brrwers after December 30, Hwever, CFPB rules still apply. March 30, MP: Servicer must receive ntificatin f the 1 st lien match n r befre March 30, 2017 December 1, 2017 HAMP: Permanent mdificatins must be effective by December 1, 2017 Servicers still need t cntinue t ffer financial cunseling fr anyne starting a new trial until December 1, If they ffer an apprved prprietary slutin, then the servicers can institute that afterwards. HAFA: Clsings must ccur by December 1, MP: Any partial r full extinguishment f 2 nd lien must be cmpleted by December 1, 2017 Escalatins: MHA HELP and HSC Centers- cases must be received by December 1, 2017 Key Takeaways: Payment Reductin amunt f payment reductin has a significant impact n perfrmance. Principal Reductin particularly fr underwater hmewners, can help achieve payment reductin. Frm HAMP PRA, we have learned that lans receiving principal reductin perfrm better after 36 mnths than lans withut principal reductin. Delinquency at Time f Mdificatin perfrmance f the mdificatin is influenced by the length f delinquency f the lan at time f mdificatin. Rbust Infrastructure and Prcesses are Imprtant fr bth servicers and hmewners many f the key prcess pints intrduced by HAMP (single pint f cntact, defined prtcls t reach ut t delinquent brrwers, prtectins against dual tracking freclsure, escalatin prcess, etc.) have been adpted by the industry and the CFPB. Lk Hlistically at the Brrwer s Situatin the tls yu use will vary with the situatin. Is the brrwer underwater? D they have a secnd lien? Hw lng culd hardship last? 2

3 Sustainable Mdificatin Prpsal Every brrwer wh is delinquent r at-risk f becming delinquent shuld be able t apply fr an incme-based mdificatin. Servicers have expressed cncerns abut the burden f ding incme verificatin, but HUD apprved husing cunseling agencies can help t relieve that burden. When a servicer receives a request fr assistance frm a brrwer, the servicer shuld explain that husing cunseling resurces are available and refer the hmewner t a cunselr that can help brrwers assemble their dcumentatin, review eligibility fr a mdificatin r ther apprpriate reslutin, and wrk with the brrwer n their husehld finances. Incme-Based Mdificatin Optin Brrwer Qualificatin: The brrwer dcuments a financial hardship by representing that (s)he des nt have sufficient liquid assets t make the mnthly mrtgage payments, by cmpleting a Unifrm Brrwer Assistance Frm 710, and by prviding tw mst recent paystubs r ther incme dcumentatin, the mst recent bank statement, and a 4506-T frm. The servicer shuld wrk directly with any husing cunselr assisting the brrwer t cllect dcumentatin. Where pssible and with brrwer permissin, the servicer shuld cllect the incme dcumentatin electrnically frm the emplyer and the bank statement frm the bank. Target Mnthly Mrtgage Payment: Identify an affrdable Target Mnthly Mrtgage Payment fr the mdificatin by using an affrdability frmula f the servicer s design as lng as the mdified mnthly mrtgage payment (including escrw and any assciatin fees) des nt exceed 31% f the brrwer s grss mnthly incme and is designed t establish affrdability and sustainability. Capitalize Arrears: Capitalize the unpaid interest, escrw advances t third parties, and any reasnable and necessary fees t third parties, eliminating all late fees and penalties. Principal Reductin: The servicer will prvide fr principal reductin t achieve the Target Mnthly Mrtgage Payment. The principal will be reduced t 95% Mark t Market Lan t Value. Servicers must initially treat principal reductin n PRA lans as nn-interest bearing principal frbearance. If the brrwer is in gd standing n each f the first, secnd and third anniversaries f the trial perid effective date, the servicer must cancel a third f the principal reductin amunt at each anniversary. Lwer Interest Rate: Reduce the starting interest rate in increments f percent t get as clse as pssible t the target mnthly mrtgage payment rati. The resulting interest rate is the permanent rate fr the life f the lan. Reamrtize the Lan: If necessary, extend the term and reamrtize the mrtgage lan by up t 360 mnths frm the mdificatin effective date (i.e., the first day f the mnth the permanent mdificatin is in effect) t achieve the Target Mnthly Mrtgage Payment. If the 360 mnth 1

4 term extensin is inadequate fr reaching the target mnthly mrtgage payment, then the terms will be extended t 480 mnths. NPV Psitive Flr: The servicer shall extend an Incme-Based Mdificatin if a psitive net present value is achieved. If the lan mdificatin becmes NPV negative, the waterfall prcess will be stpped and the brrwer can qualify fr the best mdificatin which keeps the lan mdificatin NPV psitive, r the brrwer shuld be ffered a payment reductin mdificatin (discussed belw), whichever prvides the lwer mnthly payment. Payment Reductin Mdificatin (PRM) Optin: If the brrwer is nt able t prvide the dcumentatin fr the incme-based mdificatin after the servicer has cmplied with applicable RESPA servicing rules under 12 C.F.R , r if the PRM prvides the brrwer with a greater payment reductin, the servicer will ffer a PRM. In lking at a payment-reductin-based apprach, advcates are cncerned abut whether the industry prpsal f a 20% acrss the bard payment reductin is sufficient, especially fr lwincme brrwers. We advcate fr a deeper 30% payment reductin acrss the bard r a mre flexible apprach that allws a greater target payment reductin in rder t imprve lan mdificatin perfrmance fr discrete subsets f brrwers as supprted by the data. Deeper payment reductin culd be tied t Mark t Market Lan t Value rati r ther factrs that the data shw t be related t mdificatin perfrmance. Fr brrwers with a small mnthly mrtgage payment, a 30% reductin might nt result in meaningful relief, s a minimum dllar amunt f payment reductin culd be impsed as a flr (fr example, the target payment reductin culd be the greater f 30% f mnthly payment r $200). In the PRM, the servicer shuld mdify the lan by taking the fllwing steps until the target payment reductin is reached: (1) Capitalize the interest arrears (waiving late fees), (2) Fix the interest rate at the lesser f: (a) the current market rate (determined as the Freddie Mac Primary Mrtgage Market Survey) r (b) the current cntract rate, (3) Apply principal reductin as needed t achieve the target payment, dwn t a flr f the amunt f reductin needed t bring the lan t a 95% Mark t Market Lan t Value rati. (As with the incme-based mdificatin, this principal reductin shuld initially be taken as a nn-interest bearing frbearance, but if the brrwer is in gd standing n each f the first, secnd and third anniversaries f the mdificatin effective date, the servicer must cancel a third f the principal reductin amunt at each anniversary), (4) Reamrtize the interest-bearing principal balance ver a new repayment term, lengthened as needed t achieve the target payment, up t a maximum f a new 480 mnths frm the mdificatin effective date. The brrwer will be ffered a PRM autmatically when the lan becmes 90 days delinquent. This includes sending the terms f the PRM ffer t the brrwer s husing cunselr r attrney (if the hmewner is wrking with a cunselr r attrney) s that the cunselr r 2

5 attrney can explain the mdificatin and assist the brrwer in evaluating it. The brrwer can accept the PRM by making three timely (within the mnth due) trial payments. In the PRM ffer letter, the servicer must ntify the brrwer f the ptin t defer accepting the PRM in rder t be evaluated fr an Incme-Based Mdificatin, and the fact that husing cunselrs are available t assist with that applicatin. 3

6 Recmmended Best Practices fr Lan Mdificatins 1. The trial payment plan ffer shuld include an itemizatin f the amunt t be capitalized (similar t a payff statement); estimated infrmatin abut the prpsed new interest bearing principal balance, principal reductin r frbearance; and maturity date. 2. Servicers will nt impse a mdificatin fee n the brrwer in cnnectin with the mdificatin review r apprval. 3. Brrwers will nt be required t make any upfrnt payment. 4. Brrwers wh have received a mdificatin and have had a change in circumstances may apply fr a new mdificatin. 5. Brrwers wh have received a mdificatin but where there was a mistake in determining the terms f the mdificatin may apply fr a new mdificatin. 6. Servicers will review brrwers in bankruptcy fr a lan mdificatin. 7. Brrwers wh have btained a discharge f the debt in bankruptcy will be eligible fr lan mdificatin review and will nt be required t reaffirm the debt as a cnditin f btaining a lan mdificatin. 8. Servicers will nt require brrwers t waive claims r defenses in cnnectin with a mdificatin. 9. Servicers will refer brrwers t HUD apprved husing cunseling agencies t help cllect brrwer dcuments, infrm the brrwer, and assist the brrwer thrugh the mdificatin prcess. 10. Servicers will pay the husing cunseling agencies fr services delivered and bill the investr, where apprpriate. 4