HUD NATIONAL SERVICING CENTER

Transcription

1 HUD NATIONAL SERVICING CENTER Revisions to FHA's Loss Mitigation Home Disposition Options Preforeclosure Sale & Deed-in-Lieu Working Together to Help Families Stay in Their Homes Presented by : FHA National Servicing Center This presentation is provided for informational purposes and its contents are subject to change. It is not intended to substitute or alter requirements and guidelines found in FHA handbooks, mortgagee letters, and other official FHA publications. Distribution, reprinting and/or web-publishing of this presentation is prohibited.

2 LEARNING OBJECTIVES This webinar will provide an overview of the revised requirements for FHA's Loss Mitigation Home Disposition Options (Pre-Foreclosure Sale and Deed in Lieu) as outlined in Mortgagee Letter

3 LOSS MITIGATION OPTION PRIORITY Home Retention Options: Special Forbearance Loan Modification FHA s Home Affordable Modification Program (HAMP) Home Disposition Options: Preforeclosure Sale Deed-In-Lieu of Foreclosure 3

4 PREFORECLOSURE SALE PROGRAM 4

5 PREFORECLOSURE SALE PROGRAM (PFS) REFERENCE MATERIALS ML : Delayed Implementation of "PFS Participation Requirement" Section included in Mortgagee Letter , Updated Pre-Foreclosure Sale (PFS) and Deed in Lieu (DIL) of Foreclosure Requirements ML : Updated Pre-Foreclosure Sale (PFS) and Deed in Lieu (DIL) of Foreclosure Requirements Mortgagee Letter : Pre-Foreclosure Sale (PFS) Program - Utilizing the PFS Loss Mitigation Option to Assist Families Facing Foreclosure Appendix A Attachment 1 Attachment 2 Attachment 3 Attachment 4 Attachment 5 Attachment 6 Mortgagee Letter : Partial Claims: Program Changes and Updates Preforeclosure Sale Program FAQs 5

6 PREFORECLOSURE SALE PROGRAM (PFS) Overview HUD s version of a short sale Allows a homeowner in default to sell the property and use the sale proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed Must be an outright sale of the property Owner Occupied homeowners must be reviewed for HUD s Home Retention Options prior to participation in PFS No Strategic Defaults 6

7 ML Updated PFS and DIL of Foreclosure Requirements KEY CHANGES Effective Date: 10/1/2013 Standard Option A homeowner who does not meet the qualifications for a Streamlined PFS option must submit a complete workout package Owner-Occupied Only Verification of Hardship Deficit Income Test (DIT) Documentation requirements for verifying assets, income, and expenses Cash Reserve Contribution Imminent Default Streamlined Option Servicer may approve Homeowner s meeting specific guidelines without verifying hardship or obtaining a complete mortgage workout packet Eligibility Requirements Owner-Occupied Non-Owner Occupied Servicemember Requirements Eligible Properties Standard and Streamline Option Appraisal Validation Requirements Homeowner Incentive Fee Disclosure Requirements Participation Requirements The policies outlined in ML supersede, where in conflict ML , , and All other requirements remain in effect. 7

8 ML Updated PFS and DIL of Foreclosure Requirements Previously Initiated Foreclosures Scheduled Foreclosure Sales should not be cancelled to initiate a PFS marketing period for Homeowners meeting the streamlined PFS eligibility requirements Cancel only if Servicer receives an acceptable purchase contract meeting the requirements of ML

9 PREFORECLOSURE SALE PROGRAM Overview General Homeowner Requirements Must have negative equity Limited to one FHA insured mortgage Must be an individual - no corporation or a partnership Must notify Servicer of interest to participate in PFS program Servicer must mail a copy of Form HUD (Information/Disclosure) Cooperate with Servicer requests for any required documentation Homeowner must return signed HUD Approval to Participate (ATP) to Servicer within 7 days of receiving the ATP form 9

10 Streamlined PFS Option Requirements Non- Owner Occupant Requirement Homeowner must be 90 days or more delinquent as of the date of Servicer s review Each Homeowner must have a credit score of 620 or less Servicemembers with PCS Orders Must provide Servicer PCS orders verifying new duty station is 50 miles or more away from existing residence Servicemember must submit an affidavit certifying: FHA-insured mortgage was their principal residence, and New permanent housing has been or will be acquired due to orders 10

11 Streamlined PFS Option Requirements Owner-Occupant Requirements Homeowner must be 90 days or more delinquent as of the date of Servicer s review Each homeowner must have a credit score of 620 or less Homeowner must have been reviewed for Loss Mitigation Retention Options Homeowner must also meet one or more of the following conditions: Homeowner has defaulted on a Trial Payment Plan within the last six months Homeowner has defaulted on an FHA-HAMP or standard (rate-and-term) modification within the last two years Homeowner has been deemed ineligible for a permanent home-retention option Homeowner received a Special Forbearance but, did not otherwise qualify for a permanent home-retention option by the end of the forbearance period Homeowner has been deemed eligible for and offered a loss mitigation home retention option, and: Credit score below 580 Must provide written documentation that he/she chooses not to accept the loss mitigation home retention option offered by the Servicer 11

12 Streamlined PFS Option Requirements Eligible Properties Principal Residence Second Home Investment Property Properties may be vacant No condemned Properties 12

13 Standard PFS Option Requirements Occupancy Requirement Owner Occupant Only Delinquency Requirement Mortgage must be 31 days or more delinquent at the time of closing Imminent Default (must meet one or more of the following hardships): Loss or reduction in income Change in household financial circumstances Death of a co-mortgagor Long-term/permanent illness or disability of a mortgagor or dependent family member Divorce or legal separation of a mortgagor Distant employment transfer/relocation Financial Analysis Servicer to request financial documentation Deficit Income Test Cash Reserve Contribution analysis 13

14 Standard PFS Option Requirements Deficit Income Test Required Documents Verify homeowner s monthly net income by obtaining one of the following: Two most recent pay stubs If self-employed recent quarterly or year to date profit and loss statement (compiled by a Certified Public Accountant) Social Security or Disability Income Statements Recent W-2, Form 1099, or Federal Tax Return Verify the homeowner s monthly expense Credit Report Expenses supported by bills, payment receipts, and/or the standard payment amounts under an IRS Index Past-due balances included in Bankruptcy - use minimum payment prior to delinquency 14

15 Standard PFS Option Requirements Cash Reserve Contribution Required Documents Homeowner s three most recent monthly bank statement(s) Three most recent months of brokerage statement(s) Homeowner s most recent Federal Tax Return at the time the Homeowner requests an approval for a Standard Preforeclosure Sale Cash Reserve Contribution Calculation Calculate Total Cash Reserves using highest ending balance of each asset Homeowners with cash reserves greater than $5,000 will be required to contribute 20% of the total amount exceeding $5,000 (not to exceed the difference between the unpaid principal balance and the appraised value of the property) 15

16 Case Study Ms. Smith Case Scenario: Ms. Smith was divorced in April and was awarded the property in the divorce settlement. On August 1st, Judy Smith contacted her Loan Servicer to advise them she may not be able to make the September mortgage payment due to a loss of income. Her ex-husband has not been paying the child support and alimony he was ordered to pay. Ms. Smith would like to participate in the PFS program. Homeowner Profile Monthly Net Income: $ 2, Monthly Expenses: $ Monthly Mortgage Payment: $ 2, Credit Score: 625 Property Information Unpaid Principal Balance: $ 198, Appraised Value: $ 168,

17 Case Study Ms. Smith Test Your Knowledge 1. Ms. Smith must first be evaluated for a loss mitigation retention option prior to being reviewed for the PFS program. a) True b) False 2. Based on the scenario presented, Ms. Smith is eligible for the Streamlined Option of the PFS. a) True b) False 17

18 Case Study Ms. Smith Cash Reserve Contribution Analysis Asset Statement Period May June July Highest Ending Balance Cash- Brokerage Stmt. $ $ $ $ Bank Account $ 3, $ 2, $ 2, $ 3, Stocks $ $ $ $ Total $ 3, Assuming Ms. Smith must be reviewed under the Standard PFS option, what is Ms. Smith s required cash contribution? a) $ b) $ 3, c) $ 0.00 d) $ 3,

19 Case Study Mr. Jones Case Scenario: Mr. Jones owns an FHA-insured investment property. He has owned this property since 2000 and began renting it in Mr. Jones has contacted his Loan Servicer and requested approval to participate in the FHA Short Sale Program. At the time of the Servicer s review, Mr. Jones is 2 mos. delinquent with his mortgage payment, and has a credit score of 595. Test Your Knowledge 1. Mr. Jones is eligible for FHA s Streamlined Pre-Foreclosure Option. a) True b) False 19

20 Appraisal Requirements Property Value PFS Properties are to be listed at no less than the As Is appraised value Requires a standard electronically-formatted appraisal from an FHA roster Appraiser As Is Valid for 120 days No Distress Sales Servicer must provide a copy of the appraisal to the Homeowner, their sales agent, or HUD upon request New appraisal may be obtained to ensure current FMV during marketing period 20

21 Appraisal Requirements Appraisal Validation Servicer must submit a variance request via EVARS if one of the following conditions exist: The current FHA appraised value is less than the unpaid principal balance (UPB) by $75,000 or greater; or The current appraised value is less than 50% of the UPB If neither of these conditions exists, the FHA PFS appraisal is acceptable if: Servicer obtains a BPO or AVM that is within 10% of the appraised value A variance request must be submitted through EVARS if the value is not within 10% of the appraised value Variance requests submitted through EVARS must be approved prior to authorizing the marketing of the property 21

22 Appraisal Requirements Property Condition Properties that have sustained damage may be eligible for the PFS Option Servicer must obtain the government s cost estimate to repair from HUD s National Servicing Center Servicer must submit a variance request through EVARS to acquire approval Servicers are responsible for the cost of surchargeable property damage As Is properties - Servicer will be required to deduct the government s estimate cost from their claim As Repaired properties is not an allowable settlement cost If property damage is not surchargeable, NSC approval is not required Subsequent damage after approval must be disclosed to the Servicer to determine continued eligibility for the Preforeclosure Sale Option 22

23 Property Inspection Requirements Property Inspections Servicer must conduct property inspection on the 45th day of delinquency if there has been no contact with Homeowner Property Preservation and Protection inspections (P&P) not required during the approved PFS period if contact with Homeowner is maintained If there is reason to believe the property has become vacant during the PFS period, Servicer must perform property inspection Inspections to verify occupancy are reimbursable 23

24 Incentive Fees Owner-Occupant Incentive fee up to $3,000 Homeowners required to make a cash reserve contribution under the Standard PFS option are NOT eligible for the $3,000 consideration Servicer may obligate up to an additional $1,500 from Sale Proceeds for discharging junior liens Used for transition or relocation assistance Non-Owner Occupant Non-owner occupants are not eligible for a Homeowner incentive fee Servicer may obligate up to an additional $1,500 from Sale Proceeds for discharging junior liens

25 Title and Junior Lien Requirements Condition of Title Property must have marketable title Servicers are expected to assist in clearing title issues Homeowner s incentive must be applied to satisfy or release any secondary lien(s) If Homeowner s incentive is not sufficient, Servicer can obligate an additional amount towards secondary lien(s) Available monies for payment of Junior Liens Owner-Occupant up to $4,500 (subject to qualifying) Non-Owner Occupied Homeowner $1,500 25

26 Disclosure Requirements PFS and DIL Required Disclosure Prior to approval for a PFS or DIL, Servicer must notify Homeowner in writing of the following: Homeowner must be in default on the date the PFS transaction closes PFS and DIL transactions are reported to Credit Bureaus Servicemembers should obtain guidance from employer regarding the potential impact on security clearance and employment CAIVRS Reporting and potential impact 26

27 Case Study Ms. Smith Test Your Knowledge 1. Ms. Smith s current UPB is $198,600. The FHA appraised value is $168,000. What is the required next step in the appraisal validation process? a) Submit a variance request through EVARS because the FHA appraised value is less than the amount owed. b) Validate the FHA appraised value with a Broker s Price Opinion (BPO) or an Automated Valuation Model. c) Both A & B d) None of the above 27

28 Participation Requirements APPROVAL TO PARTICIPATE If Homeowner is determined eligible for PFS: Servicer to provide Form HUD Approval to Participate If the Homeowner is not eligible for a PFS: Servicer must advise in writing Explain the reason for denial, and Allow Homeowner at least 7 calendar days to respond Anti-Fraud Requirements Servicer may not approve a Homeowner for a PFS if Servicer knows or has reason to know of homeowner s fraud or misrepresentation of information Third-party fees may not be included, unless explicitly permitted No charge may be assessed for participation in the PFS transaction 28

29 Marketing the Property Participation Requirements A real estate broker/agent must be retained to market a property within seven (7) days of the date the Approval to Participate is granted Any conflict of interest, appearance of a conflict or any self-dealing by any of the parties is strictly prohibited Broker/Agent shall never be permitted to claim a sales commission on a PFS of his or her own property, or that of an immediate family member Listing Agreement must include the cancellation clause Pre-Foreclose Sale Addendum to be provided to Homeowner and Real Estate Agent Must be executed by all parties upon receipt of an acceptable sales contract 29

30 Marketing the Property Participation Requirements Property Maintenance Homeowner must maintain the property in ready to show condition Homeowner must make basic repairs and perform all normal property maintenance activities Arms-Length Transaction The PFS must be between two unrelated parties whose selling price and other conditions would prevail in an open market environment A relocation service affiliated with the Homeowner s employer may contribute a fixed sum towards the proceeds of the PFS, without altering the arms-length nature of the sale 30

31 Marketing Period Duration Homeowners have 4 months from the date of the Servicer s Approval To Participate in the PFS program to obtain a signed sales contract Homeowners have a pre-approved extension of two additional months to complete the PFS sale if one of the following exists: The Servicer is in the Tier 1 category of the Tier Ranking System, or There is a signed Contract of Sale but settlement has not occurred by the end of the fourth month 31

32 Contract Acceptability Contract Approval Minimum Net Sale Proceeds: 0-30 days of marketing period - Net 88% of As Is appraised FMV days of marketing period - Net 86% of As Is appraised FMV 61 days - duration of PFS - Net 84% of As Is appraised FMV Net Sale Proceeds is defined as the sales price minus closing/settlement costs 32

33 Contract Acceptability Allowable Settlement Costs Up to 6% sales commission Real estate taxes Local/state transfer tax stamps and other closing costs customarily paid by the seller Incentive Compensation paid to qualifying Owner Occupant Seller of $3,000 Up to $1500 for the discharge of junior liens Outstanding Partial Claim Up to 1% of the buyer s first mortgage amount if the sale includes FHA financing Unacceptable Settlement Costs Repair reimbursements or allowances Home Warranty fees Discount points or loan fees for non FHA financing Servicer s Title Insurance fee 33

34 Contract Execution and Closing Contract Approval Servicer has 5 working days from receipt of an executed Contract for Sale to respond back to the Homeowner using Form HUD Sales Contract Review No sale by assumption is permitted Closing and Post Closing Servicer to provide Closing Agent with Form HUD Closing Worksheet Closing Agent to provide Servicer a copy of HUD-1 Settlement Statement for final review Upon final approval from Servicer, Closing Agent must pay expenses and forward the net sales proceeds, final HUD-1 and executed PFS Addendum to Servicer PFS must be reported to National Credit Bureaus as a short sale 34

35 Termination of the PFS Early Termination Homeowner may voluntarily terminate participation Irresolvable title problems Homeowner not acting in good faith to market property Significant change in property condition or value Re-evaluation of the information provided by the Homeowner indicates that the case does not qualify for the PFS option PFS Failure Homeowner must be re-evaluated by the Servicer for other loss mitigation options Must be reviewed within 90 days of the expiration of the PFS period, or foreclosure must commence If foreclosure does occur, neither HUD nor the Servicer will pursue the Homeowner for a deficiency judgment as a result of the Homeowner s good faith effort in the Preforeclosure Sale program 35

36 Post Closing Claim Filing HUD will reimburse Servicer for reasonable and customary costs HUD will not pay property-related costs which were incurred after the PFS closing date HUD will monitor Servicer by selecting and reviewing appraisals for risk assessment purposes 36

37 Features & Benefits : Deed-in-Lieu of Foreclosure 37

38 DEED-IN-LIEU OF FORECLOSURE REFERENCE MATERIALS Mortgagee Letter : Loss Mitigation Program - Comprehensive Clarification of Policy and Notice of Procedural Changes Mortgagee Letter : Deed-in-Lieu of Foreclosure Consideration Increase and the Authorization to Pay Cash to Occupants for Keys Prior to Eviction Mortgagee Letter : Single Family Foreclosure Policy and Procedural Changes: Reasonable Diligence Requirements; Update to HUD s Schedule of Allowable Attorney Fees; and Update to HUD s Foreclosure Time Frames Attachment 1 Attachment 2 Attachment 3 Attachment 4 ML : Updated Pre-Foreclosure Sale (PFS) and Deed in Lieu (DIL) of Foreclosure Requirements Deed-in-Lieu of Foreclosure FAQ 38

39 DEED-IN-LIEU OF FORECLOSURE DIL allows the Homeowner to voluntarily deed the collateral property to HUD in exchange for a release from all obligations under the mortgage. Homeowner Benefits Although this option results in the Homeowner losing the property, it is often preferable to foreclosure because: Homeowner mitigates the cost and emotional trauma of foreclosure Owner-Occupant Homeowner is eligible to receive up to $2,000 incentive payment Deed-in-Lieu is generally less damaging than foreclosure to Homeowner s ability to obtain credit in the future Servicer Benefits Avoids the time and expense of a legal foreclosure action, and Due to the cooperative nature of the transaction, the property is generally in better physical condition at acquisition 39

40 DEED-IN-LIEU OF FORECLOSURE Homeowner Requirements Unable to support the mortgage debt Owner-Occupant (Standard or Streamline Option) Non-Owner Occupant (Streamlined Option) Title must be free and clear of all liens 40

41 DEED-IN-LIEU OF FORECLOSURE General Requirements A complete homeowner workout packet is not required if Homeowner met the Streamlined PFS option All Homeowners named on Note must execute the Deed to convey Homeowners agree to certify compliance with program stipulations concerning property condition Account must be at least 31 days delinquent when the Deed-in-Lieu is recorded or if processed under a Streamline Option, meet the prescribed delinquency requirements 41

42 DEED-IN-LIEU OF FORECLOSURE Agreement Requirements A written Deed-in-Lieu Agreement must be executed by the Homeowner and Servicer which contains all of the conditions under which the deed will be accepted All conditions can be found in Mortgagee Letter

43 RESOURCES 43

44 HOME RETENTION COLLECTIONS FHA LOSS MITIGATION OPTIONS AT-A-GLANCE OPTION DDS CODE DESCRIPTION/REQUIREMENTS Informal FB HUD HB REV-5, Chapter 7 ML Repayment Verbal agreement to increase, reduce or suspend payments Duration < 3 months Verbal financials required for agreements over 30 days DAYS PAST DUE (DPD) Imminent Formal FB HUD HB REV-5, Chapter 7 ML Formal Forbearance Written agreement to increase, reduce or suspend payments Duration minimum 3 months Verified/documented financials required for agreements over 30 days Only option available for homeowner(s) when 85 percent of the surplus income is sufficient to bring the homeowner(s) current within six months Special Forbearance (SFB) ML ML ML Special Forbearance Cause of default is unemployment, must be owner-occupied Loan must be at least 3 months unpaid but not more than 12 months delinquent PITI Must provide for a minimum duration of 12 months for reemployment Requires subsequent evaluation for a more permanent Loss Mitigation option to cure the default Loan Modification ML ML ML ML Trial Payment Plan 28- Modification Started Permanent change in 1 or more of the terms, allows the loan to be reinstated and results in a payment a borrower can afford May include a change in the a) interest rate, b) capitalization of the delinquent principal, interest or escrow items, c) re-amortization of the balance due 3- month Trial Payment Plan required Must have a verifiable loss of income or increase in living expenses Surplus income must be at least the greater of $300 and 15 percent of net monthly income (85 percent of the homeowner(s) surplus income must be insufficient to cure arrearages within six months) Mortgage payment (PITI) must be reduced by the greater of $100 and 10% of the original monthly payment amount At least 12 mos. must have elapsed since the origination date of the loan Borrower may not have previously received a Loan Modification or FHA-HAMP in the previous 24 mos. This document is intended to provide summary information on HUD s Loss Mitigation Options. It is not intended to substitute or alter requirements and complete guidelines found in FHA handbooks, mortgagee letters, and other official FHA publications. Content is subject to change. 44

45 DISPOSITION HOME RETENTION FHA LOSS MITIGATION OPTIONS AT-A-GLANCE OPTION DDS CODE DESCRIPTION/REQUIREMENTS DAYS PAST DUE (DPD) Imminent FHA HAMP ML Attachment ML ML ML ML FHA HAMP Standalone Partial Claim Started 37 - FHA HAMP Standalone Modification Started 39 - FHA- HAMP Trial 41-FHA HAMP Modification Started Allows the use of a Partial Claim up to 30% of the UPB as of the date of default and combine it with a Loan Modification (May allow for only a Partial Claim or only a Loan Modification) One or more borrowers must have stable monthly income Must have a verifiable loss of income or increase in living expenses Must successfully complete a trial payment plan (4 months for imminent default, 3 months for 90+ delinquent) Total of arrearages used in calculating the FHA-HAMP Partial Claim amount is no longer limited to 12 months PITI Lender will advance funds on behalf of the borrower in an amount to reinstate a delinquent loan Borrower may not have previously received a Loan Modification or FHA-HAMP in the previous 24 mos. Pre- Foreclosure Sale (PFS) ML ML ML Deed-in-Lieu (DIL) ML ML ML Pre- Foreclosure Acceptance Plan Available 44 - Deed-in- Lieu Started Allows a borrower in default to sell home and use proceeds to satisfy the mortgage debt even if the proceeds are less than the amount owed Borrower must commit to actively market the property for 4-6 months Streamlined eligibility available for owner occupied and non-owner occupied borrower(s) meeting certain criteria Tiered Net Proceeds Requirements 1 st 30 days 88%; days 86%; 61 - remainder of marketing time 84%; Funds available for discharge of Subordinate Liens. Borrower voluntary deeds collateral to HUD in exchange for release from all obligations under the mortgage Lender must enter into a written agreement with the borrower stating specific actions that the borrower must perform in order to take advantage of this option and receive financial consideration Borrower qualifications: cause of default is incurable; collateral property must be non-occupied at the time of conveyance; good and marketable title Streamlined eligibility available for borrower(s) meeting certain criteria This document is intended to provide summary information on HUD s Loss Mitigation Options. It is not intended to substitute or alter requirements and complete guidelines found in FHA handbooks, 45 mortgagee letters, and other official FHA publications. Content is subject to change.

46 ONLINE RESOURCES National Servicing Center (NSC) Training: Includes information and training schedules for ECLASS, Classroom Training, and the Loss Mitigation Webinar Series NSC Loan Servicing Guidance Loss Mitigation Mortgagee Letters NSC Loan Servicing and Loss Mitigation FAQ HUD Approved Counseling Agencies Extension and Variance Automated Requests System (EVARS) Tier Ranking System Single Family Delinquency/Default Reporting SFDMS Reporting (FAQs) Neighborhood Watch FHA Connection Error Codes for HUD Default Reporting Delinquency/Default Status (DDS) Codes Delinquency/Default Reason (DDR) Codes EDI Webpage Code of Federal Regulations: 24 CFR 202.2, , , , , , , and HUD Handbook Rev-5: Administration of Insured Home Mortgages, Chapter 7 46

47 NSC CONTACT INFORMATION QUESTIONS: U.S. Department of HUD National Servicing Center 301 NW 6 th Street Oklahoma City, OK Secretary Held Servicing Contractor: (877) Home Equity Conversion Mortgage (HECM) Servicing: hecmservicing@deval.us Requests for Extensions: extensionrequests@hud.gov Training issues: eclass@hud.gov TRS, Data, CAIVRS, SFDMS Reporting: sfdatarequests@hud.gov Single Family FHA - Claims Processing: Claims Help Desk (FHA_SFClaims@hud.gov) 47

48 RESOURCES FHA Resource Center Frequently Asked Questions Available 24/7 A website containing over 1,300 questions and answers about FHA programs, underwriting, and processing (website available 24/7) The FHA Resource Center acts as the first line of response for the majority of industry and public inquiries about FHA programs and services Searchable by keyword and category Telephone: CALL FHA ( ) Monday-Friday 8:00AM 8:00 PM (Eastern Time) answers@hud.gov 48