COMMONWEALTH OF MASSACHUSETTS. In re Nationstar Mortgage LLC ASSURANCE OF DISCONTINUANCE PURSUANT TO M. G.L. CHAPTER 93A, 5 I.

Transcription

1 COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT DEPARTMENT OF THE TRIAL COURT CIVIL ACTION NO. In re Nationstar Mortgage LLC ASSURANCE OF DISCONTINUANCE PURSUANT TO M. G.L. CHAPTER 93A, 5 I. INTRODUCTION J 22 >oy a* 1. The Commonwealth of Massachusetts ("Commonwealth"), t gh the Office of Attorney General Maura Healey ("AGO"), and Nationstar Mortgage LLC ("Nationstar") enter into this Assurance of Discontinuance ("AOD") pursuant to M.G.L. c. 93 A, Pursuant to M.G.L. c. 93A, 6, the AGO conducted an investigation into Nationstar's compliance with, inter alia, M.G.L. c. 244, 35B ("Section 35B" or "35B") and M.GL. c. 93A, 2 in the conduct of its business of servicing mortgage loans secured by properties in Massachusetts. Section 35B requires that mortgage creditors take "reasonable steps, and [make] a good faith effort to avoid foreclosure" by reviewing certain Massachusetts borrowers who have statutorily defined "certain mortgage loans." 3. Section 35B details the process by which creditors must (a) solicit these borrowers through written notice of the borrower's "right to pursue a modified mortgage loan" (the "35B notice"), and, (b) where requested, conduct loan modification reviews and, if applicable, offer loan modifications that meet certain specified criteria. 4. As a result of the investigation, the AGO alleges that Nationstar violated M.G.L. c. 244, 35B and c. 93A, 2 by failing to provide a timely and compliant loan modification review to homeowners with Certain Mortgage Loans who availed themselves of the protections 1

2 of 35B by returning the "Mortgage Modification Options" form (the "MMO"), defined by 209 CMR In resolution of the allegations described in this AOD and in recognition of Nationstar's assistance and cooperation throughout the investigation, the AGO agrees to accept this AOD on the terms and conditions contained herein, pursuant to the Massachusetts Consumer Protection Act, M.G.L. c. 93A, 5. Nationstar voluntarily enters into this AOD, which is made without any trial or adjudication, or findings of any issue of fact or law, and is not a final order of any court. 6. Nationstar enters into this AOD for settlement purposes only and neither admits nor denies the AGO's allegations. 7. This AOD is solely for the benefit of the parties to this AOD and may not be used or relied upon by third parties. IL DEFINITIONS 8. All terms defined in 35B, including without limitation, "borrower," "creditor," and "mortgage loan," shall have the same meaning when used herein. 9. "Certain Mortgage Loan" shall mean a loan to a natural person made primarily for personal, family or household puiposes secured wholly or partially by a mortgage on an owneroccupied residential property with 1 or more of the following loan features: (i) an introductory interest rate granted for a period of 3 years or less and such introductory rate is at least 2 per cent lower than the fully indexed rate; (ii) interest-only payments for any period of time, except in the case where the mortgage loan is an open-end home equity line of credit or is a construction loan; (iii) a payment option feature, where any 1 of the payment options is less than principal and interest fully amortized over the life of the loan; (iv) the loan did not require full documentation 2

3 of income or assets; (v) prepayment penalties that exceed section 56 of chapter 183 or applicable federal law; (vi) the loan was underwritten with a loan-to-value ratio at or above 90 per cent and the ratio of the borrower's debt, including all housing-related and recurring monthly debt, to the borrower's income exceeded 38 per cent; or (vii) the loan was underwritten as a component of a loan transaction, in which the combined loan-to-value ratio exceeded 95 per cent; provided, however, that a loan shall be a certain mortgage loan if, after the performance of reasonable due diligence, a creditor is unable to determine whether the loan has 1 or more of the loan features in clauses (i) to (vii), inclusive; and provided, further, that loans financed by the Massachusetts Housing Finance Agency, established in Chapter 708 of the acts of 1966 and loans originated through programs administered by the Massachusetts Housing Partnership Fund board established in section 35 of chapter 405 of the acts of 1985 shall not be certain mortgage loans. 10. "Covered Conduct" shall mean all activities by Nationstar in connection with (i) its compliance with the requirements of M.G.L. c. 244, 35B, and (ii) the issuance of temporary term interest-only modifications. 11. "Covered Mortgage Loan" shall mean a closed-end, first mortgage loan serviced by Nationstar as of the filing of this AOD that is secured by a property that is located in the Commonwealth of Massachusetts, and is not owned, guaranteed, insured, payable to or administered on behalf of the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Ginnie Mae, the Federal Housing Authority, United States Department of Agriculture, Department of Veterans Affairs, or other federal or state agency or authority; any home equity line of credit (HELOC) and reverse mortgage shall be and are hereby expressly excluded from the definition of "Covered Mortgage Loan." 3

4 12. "Responsive Borrower" shall mean a borrower who has a Certain Mortgage Loan, as defined supra, who provides Nationstar with a completed MMO form, which form is defined and modeled pursuant to the requirements of 209 CMR (as may from time to time be amended), not more than thirty (30) days following delivery by Nationstar of the 35B notice ("delivery" is defined in 35B(c) and 209 CMR 56.05) and who requests a loan modification review under 35B. III. ALLEGATIONS 13. In 2012, the Massachusetts Legislature passed An Act to Prevent Unlawful and Unnecessary Foreclosures, Chapter 194 of the Acts of 2012, codified in part as M.G.L. c. 244, 35B. 14. To address the Legislature's concern that Certain Mortgage Loans may have an enhanced risk of default and foreclosure. Section 35B provides for heightened protections when borrowers with such loans fall behind on payments and face foreclosure. Pursuant to 35B, borrowers with Certain Mortgage Loans receive a statutorily defined notice and, if certain criteria are met, a loan modification process prior to the creditor causing publication of a notice of foreclosure sale as required by M.G.L. c. 244, The AGO alleges that Nationstar is a mortgage servicer, and as such is obligated to comply with Section 35B, which includes mortgage servicers as "creditors," as that term is defined by the statute. M.G.L. c. 244, 35B(a). 16. The AGO alleges that in various instances Nationstar failed to comply with the requirements of M.G.L. c. 244, 35B, and its associated regulations 209 CMR etseq. and therefore violated M.G.L. c. 93A, 2. The AGO asserts these alleged violations of 35B include, without limitation: 4

5 i. Failing to record, capture or note in Nationstar's systems when borrowers returned the MMO form indicating that those borrowers wished to pursue a loan modification pursuant to 35B; ii. Offering two-year interest-only modifications that result in lower payments for a two-year period, but then may result in payments substantially higher than before the modification, and thereby violating 35B's requirement that borrowers be reviewed for a loan modification they can "reasonably afford to repay... according to its scheduled payments"; iii. Failing to complete a timely review of borrowers' loan modification application required by 35B(c) and causing undue delay in the loan modification review process; iv. In some instances, denying loan modification applications on the basis that the boitowers had not returned sufficient documents to be reviewed, notwithstanding Nationstar's failures to adequately or timely communicate the requirements to the borrowers; v. Failing to disclose to borrowers Nationstar's determination of the income, debts and obligations and the net present value assessment performed by Nationstar in the review of the loan modification, as required by 35B(c); vi. Failing to provide borrowers with notice of their right to present a counter-offer after being offered a loan modification as part of a 35B review, as required by 35B(c); vii. Recording affidavits pursuant to 35B(f) attesting to Nationstar's compliance with the requirements of 35B, notwithstanding the deficiencies in its 35B loan modification review processes described above, including, notably, the failure to identify MMO forms returned by the borrower, and by recording such affidavits eliminating the borrower's ability to raise challenges to the 35B process if a foreclosure is completed and the property sold to a third party; and, viii. Failing to accurately report borrower response rates under 35B to the Massachusetts Division of Banks (the "DOB") as required by 35B(g), thereby skewing the public facing reports intended to assess the efficacy of this law. 17. The AGO alleges that Nationstar's practices put homeowners at unnecessary and unlawful risk of foreclosures in violation of the requirements of 35B, and thereby constituted unfair and deceptive acts and practices in violation of M.G.L. c. 93A, 2. 5

6 18. The AGO further alleges that the acts or practices identified in paragraph 16 above are independently or in combination unfair or deceptive, and as such constitute violations of M.G.L. c. 93A. 19. Nationstar admits neither the truth of any allegations in this AOD, nor that the alleged conduct, even if it had occurred, would constitute a violation of Chapter 93A; of Section 35B or its associated regulations, 209 CMR et. seq.; of Massachusetts foreclosure law, M.G.L. c. 244, 14; and/or of any other law or legal requirements. IV. ASSURANCES AND UNDERTAKINGS 20. Nationstar shall take the following actions in order to remedy the Covered Conduct and allegations described in this AOD, and to ensure compliance with M.G.L. c. 244, 35B and its associated regulations. Within sixty (60) days of the filing of this AOD, Nationstar shall submit documentation to the AGO sufficient to demonstrate the implementation of procedures, policies and programs to demonstrate compliance with the Assurances and Undertakings set forth in this Section IV. A. PROSPECTIVE PRACTICE CHANGES The 35B Notice and Returned MMO Form 21. Nationstar shall ensure it has sufficient systems and protocols in place to record, capture or otherwise note when a MMO form is returned in response to a 35B Notice. Such protocols shall be consistent with the following; i. Nationstar shall send the 35B notice to all borrowers who are eligible to receive the notice pursuant to M.G.L. c. 244, 35B, and its associated regulations 209 CMR et seq. 6

7 ii. Upon issuance of the 35B Notice, Nationstar shall put in place a flag or other notation in Nationstar's servicing systems that makes it evident to any Nationstar collections/loss mitigation personnel that the Massachusetts borrower has been sent the 35B Notice, and that the borrower may return the MMO form in order pursue a loan modification review; ill. Nationstar shall provide sufficient training to reasonably prepare a single point of contact ("SPOC") team specifically designated for handling Massachusetts loans while the 35B flag or notation identified in subparagraph 21(ii) is active, to be familiar with and answer questions regarding 35B and the deadline by which the MMO form must be returned in order to initiate a loan modification review pursuant to the statute; iv. Nationstar shall consider a MMO form to have been timely returned on the date it is delivered to Nationstar at the address provided to the borrower, and shall not count against the borrower any delay on Nationstar's part in uploading said form into Nationstar's tracking system; and v. Nationstar shall code or otherwise record in Nationstar's servicing systems all returned MMO forms such that these forms can be tracked within Nationstar's systems for purposes of the 35B loan modification review and reporting requirements for the DOB pursuant to 35B(g). 7

8 The 35B Loan Modification Review 22. Nationstar shall complete a timely review of a Responsive Borrower's 35B loan modification application consistent with the requirements of 35B, and its associated regulations. 23. Upon receipt of a request to pursue a 35B modification review from a Responsive Borrower, Nationstar shall review such borrower's submission for au missing documents that Nationstar requires to complete the loan modification review. Nationstar shall use best efforts to make only one request for documents following the borrower's initial submission. Such request shall issue consistent with the timelines set forth in 209 CMR Nationstar shall only request documents that it requires to complete the underwriting review of the loan modification. 25. Nationstar shall not delay or otherwise deny the loan modification on the basis that a borrower failed to submit any redundant or unnecessary documentation to complete the underwriting review of the loan modification. 26. Within thirty (30) days of the latter of Nationstar's receipt of a Responsive Borrower's (i) notification that he/she intends to pursue a modified mortgage loan, or (ii) a completed application package, Nationstar shall provide such borrower with its written assessment. As required by 35B(c), Nationstar's written assessment shall disclose Nationstar's calculation of the borrower's debts, income and obligations, as well as the result of the net present value test, upon offer or denial of a loan modification. To the extent the written assessment requires information from a third-party, which is not controllable by Nationstar, Nationstar shall endeavor to provide the written assessment as soon as practicable and shall 1 The requirements of paragraphs 22, 23, and 26 shall apply only for Responsive Borrowers whose loan meets the definition of a Covered Mortgage Loan. 8

9 notify the borrower of the reason for any delay. Delay caused by a third party shall not in any way result in the borrower being required to update previously submitted documents that were timely, but for the third-party's delay. 27. Where Nationstar is required to transfer the servicing rights to a mortgage loan during the pendency of the 35B loan modification review, Nationstar shall notify the new servicer of the status of the 35B review at the time of transfer and the outcome of the loan modification review, if applicable. Any trial plan or permanent modification Nationstar offered to the borrower shall be promptly communicated to the subsequent servicer to prevent unreasonable delay in implementation. Certain Mortgage Loan Modifications 28. Any borrower who timely returns the MMO form to Nationstar and requests a loan modification review will be reviewed to ascertain whether the borrower has a Certain Mortgage Loan. A. If the borrower has a Certain Mortgage Loan that is also a Covered Mortgage Loan, Nationstar will review such borrower for a modification under the program offered by Nationstar in Appendix A. i. If the result of the 35B loan modification review under Appendix A is net present value positive, favoring the loan modification over foreclosure, Nationstar shall offer the borrower the modification in accordance with the specifications in Appendix A; and ii. If the result of the 35B loan modification review under Appendix A is net present value negative, Nationstar shall review the borrower for a modification under 9

10 other programs, if any, offered by or otherwise available to Nationstar for such mortgage loans. B. If the borrower does not have a Covered Mortgage Loan and/or a Certain Mortgage Loan, Nationstar will review such borrower for a modification under all available programs, if any, offered by or otherwise available to Nationstar for such mortgage loans. 29. Notwithstanding the limitation in 35B(c) that the "right to a modified mortgage loan, as described in this section, shall be granted once during any 3-year period," Nationstar will issue one additional 35B Notice to any borrower who; (i) has a Covered Mortgage Loan that was not foreclosed upon; and (ii) is between days' delinquent as of January 22, 2018, or becomes 35 days' delinquent at a later point. Such borrowers will be afforded all rights pursuant to 35B to request a loan modification. The three-year limitations period of 35B(c) shall then apply to this additional notice. 30. The loan modification program described in Appendix A will be offered as described above for three years from the date of the filing of this AOD, unless the AGO after consultation with Nationstar and in her sole discretion, agrees in writing to an earlier end date. At the conclusion of the three-year period referenced herein, or any time thereafter, Nationstar may either continue to offer the program in Appendix A or adopt a different loan modification program that is compliant with Section 35B. In the event Nationstar chooses to adopt a new loan modification program, it shall provide written notice to the AGO along with the terms of the new program. 2 The 35-day period set forth herein is consistent with Nationstar's current practice of issuing a 35B notice to a borrower that is 35 days' delinquent. To the extent Nationstar's practice changes, that deadline may be altered by Nationstar provided Nationstar affords borrowers the same substantive rights reflected in this paragraph. 10

11 B. FILING AFFIDAVITS OF COMPLIANCE PURSUANT TO 35B(f) 31. Nationstar shall ensure the Nationstar employees who sign affidavits attesting to Nationstar's compliance with 35B's requirements pursuant to 35B(f), have reviewed business records that accurately reflect the actions taken in connection with the mortgage loan at issue. 32. Nationstar shall perform regular reviews of borrower account information to ensure its practices and protocols intended to ensure compliance with 35B are consistent with the requirements of the statute, its implementing regulations and this ADD. 33. Nationstar shall develop a reporting mechanism through which any employee may report inconsistencies, errors or other issues identified in the 35B process. Any such reports shall be sent to the Chief Compliance Officer (CCO) of Nationstar, who shall conduct a review of the allegations or concerns and work with management and other control groups at Nationstar to ensure that all processes and controls dealing with 35B are effective and moreover in compliance with this AOD and applicable law. At the conclusion of any review the CCO shall notify the manager of those employees executing 35B(f) affidavits so that they are aware of any efforts to remedy the concerns identified in such reports. 34. Nationstar 35B(f) affiants shall also be made familiar with the terms and allegations in this AOD and their obligations under the law. C. REPORTING TO THE DIVISION OF BANKS 35. Nationstar shall ensure that it submits materially accurate reports to the DOB pursuant to the requirements of 35B(g), the implementing regulations, and in accordance with the DOB's instructions. 11

12 V. PRINCIPAL REDUCTION LOAN MODIFICATION REVIEW FOR CERTAIN HOMEOWNERS 36. In an effort to fully and finally resolve this investigation, Nationstar shall also provide the following categories of borrowers with the opportunity to be reviewed for the loan modification described in Appendix A. If the borrowers timely respond to the invitation, these bon'owers will be reviewed for the loan modification described in Appendix A regardless of whether they timely returned a MMO form or have a Certain Mortgage Loan. The categories eligible for this relief are: 1. Any borrower with a Covered Mortgage Loan that is more than 60 days' delinquent as of January 22, 2018, that has not been foreclosed upon, and that is not on an active trial plan awaiting permanent modification; ii. Any borrower with a Covered Mortgage Loan subject to an Interest-Only Modification Program as of January 22, 2018; or iii. Any borrower or former borrower who (1) has or had a property secured by a Covered Mortgage Loan; (2) the Covered Mortgage Loan was foreclosed upon prior to August 1, 2017; and (3) the borrower currently remains in the property. 37. Nationstar has disclosed the approximate number of borrowers that fall into each category above to the AGO. Nationstar will provide a list of the eligible borrowers within 60 days of filing the AOD, if not sooner. 38. Nationstar will provide notice of the opportunity to pursue a loan modification review to these borrowers as specified in a form and schedule to be approved by the AGO. 3 TO the extent that any Covered Mortgage Loan that would otherwise fall into the categories identified in paragraph 36(i) - (iii) is in active contested litigation, Nationstar will review the Covered Mortgage Loan for a MMO form that was timely returned. If no form was timely returned, then the borrower will not be eligible for relief under paragraph 36 and the litigation will proceed. If an MMO form was timely returned, the borrower would be offered the loan modification review described in Appendix A. 12

13 39. Nationstar shall not proceed with foreclosure on the Covered Mortgage Loans identified in paragraph 36(i) - (iii) until these borrowers have had the opportunity to apply and be fully reviewed for the loan modification program identified in Appendix A. 40. Nationstar represents to the AGO that it does not anticipate any event or circumstance that will impede it from completing the Appendix A loan modification review of all or substantially all of the borrowers with Covered Mortgage Loans identified for review in this Section V. Nationstar acknowledges that the foregoing representation is material to the AGO's decision to enter into this AOD. 41. Should the seivicing rights to any Covered Mortgage Loan identified in paragraph 36(i)-(iii) be required to be transferred before the loan modification process identified in Appendix A is complete, and before the borrower either has an opportunity to accept any program for which they are eligible or is sent a written assessment that they do not qualify, Nationstar shall inform the successor servicer of this AOD, and the AGO of the transfer. VI. MONETARY PAYMENT 42. Nationstar shall, within five (5) business days of execution of this AOD, forward a payment of $500, to the Commonwealth of Massachusetts. At her sole discretion, and so long as permitted by law, the Attorney General shall distribute this payment: (a) to borrowers affected directly by the conduct addressed through this AOD; (b) to the General Fund of the Commonwealth of Massachusetts; or (c) to the Local Consumer Aid Fund established pursuant to M.G.L. c. 12, 11G. 43. Unless otherwise directed by the AGO, this payment shall be made by wire transfer or certified check, made payable to the "Commonwealth of Massachusetts," and shall be ( 13

14 delivered to Lisa Dyen, Assistant Attorney General, Consumer Protection Division, Office of the MA Attorney General, One Ashburton Place, 18th FL, Boston, MA VII. COOPERATION AND REPORTING 44. Nationstar shall fully cooperate with the AGO in the implementation of this AOD and any related AGO monitoring, reviews or compliance undertaken by the AGO. 45. Upon execution of this AOD, Nationstar will have no continuing obligation to provide any documents or information to the AGO pursuant to the CID, including any supplements thereto. However, Nationstar agrees to respond to reasonable requests from the AGO for information or documentation related to the implementation of this AOD. 46. Biannually from the date of filing and continuing for two years, Nationstar shall provide a "35B Monitoring Report" documenting its compliance with the requirements of Section V, as well as any additional loan modification reviews conducted pursuant to 35B. The format of the 35B Monitoring Report shall be reasonably approved by the AGO. VIII. RELEASE 47. The AGO fully and finally releases Nationstar and its parent corporations, affiliates, subsidiaries and subdivisions, and their officers, agents, servants, employees, and shareholders, from any and all civil liability arising out of conduct occurring prior to the execution of this AOD relating to (i) compliance with 35B and/or its associated regulations, 209 CMR etseq., (ii) M.G.L. c. 244, 35A, (iii) publishing a notice of sale in a non-judicial foreclosure proceeding prior to securing an assignment of mortgage in violation of M.G.L. c. 244, 14, (iv) any Covered Conduct, and (v) any other alleged conduct described herein. Accordingly, the AGO will not proceed with, or institute, a civil action or proceeding under M.G.L. c. 93A, or any other civil statute or regulation, or common law, against Nationstar, its 14

15 parent corporations, affiliates, subsidiaries or subdivisions, or their officers, agents, servants, employees, or shareholders alleging liability based on any such conduct from civil liabilities enforceable by the AGO in connection with the conduct described in (i)-(v) in this paragraph. 48. Nationstar acknowledges the release does not cover criminal conduct. V. GENERAL PROVISIONS 49. This AOD shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, and the Suffolk Superior Court of the Commonwealth shall retain jurisdiction over this AOD. 50. This AOD constitutes the entire agreement between the AGO and Nationstar and supersedes any prior communication, understanding, or agreements, whether written or oral, concerning the subject matter of this AOD, including the December 16, 2016 Tolling Agreement and any hold agreements which shall be terminated upon entry of this AOD. 51. Nothing in this AOD shall preclude any Nationstar borrower from applying or receiving any relief available for any similarly situated Nationstar borrower, including, without limitation, an opportunity to apply for a deed in lieu, short sale or other foreclosure alternative, incentive payments related to relinquishing rights to the property, loss mitigation or foreclosure prevention reviews under any other settlement or resolution with any federal or state agency or any other relief to which the borrower would otherwise be eligible. 52. This AOD can be amended or supplemented only by a written document signed by all parties or by court order, including injunctive relief. Amendments or supplements may be executed in separate counterparts, with signatures conveyed by mail or by facsimile, electronic mail, or other electronic means. 15

16 53. This AOD does not supersede or alter Nationstar's obligation otherwise to comply with applicable law. 54. This AOD does not resolve, settle, release or otherwise affect any actual or potential claims against Nationstar by any parties, other than the Commonwealth and its subdivisions. 55. Nationstar waives all rights to appeal or otherwise challenge or contest the validity of this AOD. 56. Nationstar shall not argue that because of this AOD it is entitled to any offset or reduction of any compensatory monetary remedies imposed in any related consumer or government action. 57. In the event that 35B and/or its associated regulations are repealed, or a creditor's obligations thereunder are substantially eliminated or otherwise substantially altered, Nationstar's obligations under this AOD shall be adjusted consistent with the changes to the law. Any such adjustment to Nationstar's obligations under this AOD will be confirmed in writing by the AGO. 58. This AOD may be signed in multiple counterparts, each of which shall be considered an original and all of which, when considered together, shall constitute a whole. This AOD shall be effective upon its execution by all parties hereto and shall thereafter be filed by the AGO in the Superior Court for Suffolk County, Commonwealth of Massachusetts. 59. The signatories for Nationstar represent and warrant that they have the full legal power, capacity, and authority to bind the parties for which they are executing this AOD. 60. Nationstar acknowledges that it was represented by counsel in this matter and had the opportunity to read and consult with counsel regarding all of the terms of this AOD. 16

17 61. By signing below, Nationstar agrees to comply with all of the terms of this AOD. DATED: January 18,2018 Office of the Massachusetts Attorney General, Maura Healey By:. ; LisaR. DyenrtBBO# ) Michael Lecaroz (BBO# ) Assistant Attorneys General Max Weinstein (BBO# ) Chief, Consumer Protection Division Office of the Attorney General V24/38755/118 17

18 Appendix A Principal Reduction Loan Modification Review Nationstar Mortgage LLC ("Nationstar") shall conduct the following Principal Reduction Loan Modification Review (the "PRLM") for all borrowers who: (1) timely return the Mortgage Modification Options form requesting a loan modification review and that have a Certain Mortgage Loan that is also a Covered Mortgage Loan; and (2) those additional borrowers identified in Section 36 of the Assurance of Discontinuance ("AOD") as eligible for the PRLM. Borrowers eligible for the PRLM shall be evaluated as follows: 1. Determine the applicant's gross monthly income; a. All Borrowers/Contributors a RMA/UBAF Wage Earners- 2 Most Recent Paystubs with YTD Earning/Deductions H Self Employed- Most Recent Quarter Profit and Loss Rental Income- Current Lease Agreement along with (1) Proof of Receipt Partnership/SCorp- Most Recent Quarter Profit and Loss H Fixed Income (e.g., SSI, Pension, Annuity, Retirement) Current Award letter OR (1) Proof of Receipt Food Stamps/Welfare- Current Award Letter Child Support/Alimony- Official Court Recorded Document along with (2) Proof of Receipt* n HOA>$ 100 Monthly- Proof of HOA Statement Divorce- Court Recorded Divorce Decree Separation- Legal Separation Agreement OR Quit Claim Deed (if applicable) Non-Married Borrowers- Quit Claim Deed Death of a Borrower-Death Certificate * Child support or separate maintenance income does not need to be disclosed if applicant chooses not to have it considered for repaying the mortgage debt. If the additional income would disqualify applicant, it will be removed from consideration. 2. Determine the applicant's current monthly mortgage payment to gross income ratio (hereinafter the "Mortgage Payment Ratio" or "Payment Ratio"); 1 1 The calculation of the mortgage payment to income ratio shall be consistent with the guidelines utilized in the Making Home Affordable, HAMP modification program. As such, the monthly mortgage payment shall include principal, interest, taxes, insurance, and when applicable, association fees, and existing escrow shortages, and shall be compared to the borrower's gross monthly income. 1

19 3. If the Mortgage Payment Ratio is below the target ratio of 31 %, the applicant is not eligible for the PRLM and Nationstar shall review the applicant for a modification under all available programs, if any, offered by or otherwise available to Nationstar for such mortgage loans; 4. If the Mortgage Payment Ratio is above 31%, Nationstar will review the loan for a PRLM by completing the following steps. a. Waive any late fees; b. Determine the outstanding principal balance by capitalizing all other fees (excluding late fees), advances, and outstanding interest; i. Capitalization 1. Current UPB + (Plus) 2. Outstanding escrow advances + (Plus) 3. Corporate Advances + (Plus) 4. Net Disbursements + (Plus) 5. Conversion Disbursements + (Plus) 6. Unpaid Legal Fees + (Plus) 7. Interest through mod effective date - (Less) 8. Suspense Balance c. Apply the PRLM "Waterfall" as follows to the outstanding principal balance: i. Reduce the outstanding principal balance until: 1. The current loan-to-value ratio ("LTV") reaches 80%; or 2. The applicant's payment reaches the 31% Mortgage Payment Ratio for the applicant. a. The Mortgage Payment Ratio must be at or below 31%. ii. If the Mortgage Payment Ratio exceeds 31% after applying the principal forgiveness described above, Nationstar will incrementally reduce the interest rate by.125% to reach the 31% target Payment Ratio, stopping at the current market rate, which is defined as the FHLMC/FNMA Modification Interest Rate; 2

20 1. If at 80% LTV and target principal and interest payment is not reached, reduce interest rate by.125% and stop at market rate as defined above; iii. If the target 31% Payment Ratio is not reached after the maximum interest rate reduction, Nationstar will extend the term of the loan, incrementally up to 15 years in order to achieve the 31% target Payment Ratio. In no event, will the loan's term be extended beyond 45 years from the loan's first payment due date. d. Once the applicant meets the target Payment Ratio of 31% through adjustments specified in the PRLM Waterfall (subparagraph c), Nationstar will perform the FDIC's Net Present Value test (the "NPV test") on the adjusted loan. 3 e. If the NPV test is positive, Nationstar will offer the applicant the PRLM loan modification for which they were reviewed. f. If the NPV test is negative, Nationstar will re-run the PRLM Waterfall but rather than forgiving the principal balance down to 80% of the LTV ratio, Nationstar will consider whether substituting some amount of principal deferment instead of principal forgiveness to reach the 80% ratio will result in a positive NPV value, and if so Nationstar will offer said modification ("second look"). i. Nationstar will substitute forbearance for forgiveness in increments of 25% until the calculation considers the modification with 100% forbearance. g. If the target monthly Mortgage Payment Ratio is not achieved or the NPV test remains negative after the adjustments in subparagraph (f), Nationstar will review for a modification under all programs, if any, offered by or otherwise available to Nationstar for such mortgage loans. 5. Nationstar may require as a condition of the PRLM modification that the applicant complete a three-month trial plan by timely making three "trial payments." The trial principal and interest payment shall be equivalent to the permanent modification 2 If an applicable Pooling and Servicing Agreement restricts term extension, this step will be modified or eliminated consistent with such restriction. 3 The FDIC net present value tool is available at In the event that the calculator is no longer available on the FDIC website, Nationstar will supply the worksheet to any homeowner who so requests. 3

21 principal and interest payment*, and the principal and interest payment shall reflect the 31% target Mortgage Payment Ratio that was used in the PRLM Waterfall. Nationstar may also require the applicant to execute and deliver documentation to Nationstar codifying the modification. * The trial payment and permanent modification payment may also include escrow amounts. 6. If the applicable Pooling and Servicing Agreement (PSA) restricts principal reduction, or the investor has any other restrictions that impede implementation of this PRLM review, Nationstar will request a waiver from the investor(s). If the investor(s) does not grant a waiver, simply refers Nationstar to the PSA, or fails to respond to the request in a reasonable time (at least 10 business days) and the mortgage loan is for PRLM review, Nationstar will notify the AGO, and provide 10 business days for the AGO to review the restriction and Nationstar's determination, and respond. Nationstar will make one additional request to the investor(s), if the AGO so requests, and will provide the name and contact information of the investor(s). If after the AGO has had the opportunity to review, respond and any subsequent request has been completed, Nationstar will review the applicant for the PRLM without the principal forgiveness feature or any other feature that is not permitted by the investor V6/38755/118 4