The Mortgage Resolution Fund

Transcription

1 The Mortgage Resolution Fund Creating a Safety Net for Delinquent Homeowners and Distressed Communities Florida Housing Finance Corporation Board of Directors October 14, 2011

2 Overview MRF Mission Distressed Mortgage Note Approaches Key Participants MRF Program Updates and State Specific Policy Items MRF Operating Model MRF Investment Filters and Florida Target Areas Geographic, Market Viability and Loan Level Investment Filters The MRF Difference Next Steps 2

3 Mortgage Resolution Fund (MRF) Mission The Mortgage Resolution Fund keeps families in their homes and stabilizes communities by: Using Hardest Hit Funds to purchase nonperforming loans (NPL s) in targeted geographic markets at its current discounted market value; Making housing payments affordable by reducing mortgage payments to sustainable levels that start immediately during a Trial Modification Program period; Providing high-touch local resolution specialist that deliver high quality services to current homeowners to address their mortgage delinquency and nonmortgage debts; Right-sizing underwater borrowers with substantial permanent principal reduction based on current property values, their ability to pay and their successful completion of MRF s Trial Modification Program; Creating a safety net for the delinquent family and for the distressed property if loan refinancing is not feasible; Through the sale of the re-performing loans and homes for those not able to be modified, recycle the funds to help more households until the end of the program in 2017 when the uncommitted funds are returned to the taxpayers. 3

4 Distressed Mortgage Notes Approaches Current Private Sector Approach Bulk purchases with no intentional geographic concentration except an avoidance of judicial foreclosure states Capital which requires high return and stringent timing Core strategy is liquidation of the asset (short sale or foreclosure) No direct engagement of borrower in distress Standard retail disposition of assets that don t achieve modification (which is 70% of the NPL s purchased) Engage distressed servicing experts for asset pricing, due diligence and servicing MRF PROGRAM Approach Targeted neighborhoods to drive impact Patient capital which allows for flexibility and options Permanent principal reduction to make first mortgage payments affordable (not greater than 31%) Ability to address non-mortgage debts (not greater than 45%) Local community-based engagement and counseling Neighborhood stabilization disposition of unmodified assets Engage distressed servicing experts for asset pricing, due diligence and servicing 4

5 Mortgage Resolution Fund, LLC: Members and Roles MEMBER SERVICES OVERSIGHT: MRF, LLC is comprised of a partnership of four national non-profit entities that each has a mission to Stabilize neighborhoods. Each organization has specific functions within MRF as defined below. Mercy Portfolio Services (MPS) will serve as the Fund Manager of the partnership and has dedicated three senior staff to the effort. MRF s President, Chief Investment Officer, and the VP of Operations are technically employees of MPS but are dedicated to manage MRF. The latter two positions are full time MRF positions. Each member and their respective scope of work is: Mercy Portfolio Services (Fund Manager / MRF executive staff team) MRF Operations Member and Non-Member Services Management Members are listed below Non-members included American Mortgage Capital Group (loan level due diligence) and Select Portfolio Services, Inc. (special servicer) Distressed Note Evaluation and Investment Recommendations Delinquent Note Pool Acquisitions/Closings Servicer Oversight Physical Asset Management Capital Markets Strategies and Management: Acquisition Fund, MRB Program, Fund Closings Enterprise Community Partners Financial Management and Reporting Loan and Pool Level Compliance Audit/Treasury Functions Housing Partnership Network Resolution Specialist Management, Training and Reporting National Community Stabilization Trust Note Sourcing through Servicer Network Alternative Asset Disposition (Short Sales, Deed in Lieu of, Foreclosures)

6 MRF Program Updates and State Specific Policy Items MRF Program Treasury approved IHDA/MRF Illinois Program on June 29, 2011 Closing of MRF Illinois One (Fund One) is targeted for early November 2011 First pools targeted for purchase in December 2011 State Specific Policy Items Programmatic alignment: National program adapts these key program guidelines to be consistent with Florida s priorities: Geographic targeting: areas to be agreed upon by FHFC and MRF through use of MRF Program Investment Filters and on-the-ground delivery capacity of MRF Program services Property types: Can range from owner-occupied single family detached or owner-occupied 1-4 single family depending on FHFC priorities 6

7 MRF Operating Model Loan Purchase Loan Sourcing Loan Selection and Purchase Loan Options Asset Resolution Sourcing Method One: Once purchased, loan servicing will be transferred to the MRF Program Special Servicer. Loan Modifications & Sale: Borrowers who successfully complete the trial modification period will receive a permanent modification. Geographic Filter Loan Level Filter AMCG will source loans from Capital Markets trading desks and housing counseling agencies. Sourcing Method Two: NCST will source loans from servicers; agencies; and housing counseling agencies. Notes will be reviewed against purchase criteria. Due diligence will be conducted. Pricing will be negotiated with servicers. The family will be connected to a MRF Program Resolution Specialist. The specialist will evaluate the household; develop an Individual Program Plan (IPP); and, recommend the household be placed in one of three options: 1. Trial Modification, leading to Permanent Modification; 2. Alternative Disposition; or 3. Foreclosure. Borrowers may elect to refinance with an existing conventional product. Remaining loans will be seasoned and sold into the market as conditions allow. Alternative Disposition and Foreclosure: Short Sale Deed in Lieu Foreclosure 7

8 MRF Target Areas: Geographic Investment Filter The MRF Program uses two investment filters to arrive at its optimal geographic target areas and a third investment filter to determine which loans are eligible for purchase. Filter One (1) defines the core geography for the program in any given market. This filter is updated annually and includes the following criteria. The census tracts within each eligible county will be analyzed and those that score between 12 and 19, as defined by HUD NSP2-CIS, will be eligible. The selected census tracks will be evaluated and those with a USPS vacancy rate of 10 percent or less will be eligible. The selected census tracks will further be evaluated using an average of 120% household income and those with an average at or below this AMI will be eligible. 8

9 MRF Target Areas: Market Viability Investment Filter Investment Filter Two (2) defines local market viability by analyzing sales data (i.e., average sales prices and foreclosure sales prices) and the program cost assumptions at the zip code level. This specific filter forms the basis for determining whether the specific zip codes are eligible programmatically. This filter is updated with each new pool contemplated for purchase by MRF. The sole criteria for whether a zip code is eligible under this filter analysis is whether the pro forma HHF net return is equal to or greater than 100%. 9

10

11

12

13

14 MRF Target Areas: Loan Level Investment Filter Filter Three (3) requires that individual loans within the eligible target areas meet the following criteria: Owner-occupied, single family detached home, no vacancies First lien position, with no existing second lien (unless second lien is or can be acquired) No Second Homes or condominiums Payment delinquency of 30 days but prior to judgment of Sherriff s sale; no REO Chapter 13 bankruptcy status is acceptable if borrower(s) are performing on an approved Chapter 13 plan All forms of loan credit documentation are acceptable (Full, Stated etc.) No early payment defaults or first payment defaults on original loan

15 The MRF Difference The MRF Program is different than any other private or public program currently operating in the market. Community-Centered. The MRF Program geographically targets areas for delinquent note purchases to maximize its impact on neighborhood stabilization. Consumer-Centered. The MRF Program has a local resolution specialist that provides non-mortgage debt reduction services in a holistic manner to the homeowner and does so throughout the trial modification period. This consumer-centered approach should lead to much higher modification rates than any other program. Permanent Solution. With its long-term mortgage program, MRF provides a permanent solution for the homeowner and the community. Upon successful completion of the program s trial modification program, the current mortgage is refinanced with a new loan with a permanently reduced principal balance

16 Next Steps Upon Board direction to staff to work with MRF, below are likely steps and a possible timeline. Move forward with a FHFC/MRF Working Group structure Has been structured with other HFA s as 4 meetings of 3-4 hours each Completed with 60 days Product of is the MRF Florida Program Approval by both FHFC and MRF Amendment of State Plan by Treasury (assumes nothing different in basic MRF Program structure) Closing on Fund 16