1mp phase 2 1 · jan –mar 2010 (3 months) = $63,500 phase 3 commencement phase 2 evaluation phase...
TRANSCRIPT
1MP_Phase 2 1
1 Making Home Affordable | February 2012
First Lien Modification Program Home Affordable Modification Program ℠
Phase 2 Evaluation
2 Making Home Affordable | February 2012
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 guidance set forth in
the Handbook.
3 Making Home Affordable | February 2012
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 stay
in their homes.
By participating in HAMP,
a servicer, investor and
borrower become
eligible for incentive
compensation from the
U.S. Department of the
Treasury.
HAMP participating
servicers and investors perform modifications,
possibly reduce losses,
and help the United
States housing market grow stronger.
Notes:
• The material in this presentation applies to mortgages not held by a GSE (Fannie Mae and Freddie Mac).
• This presentation is directed to servicers who signed the Servicer Participation Agreement and related
documents (SPA).
HAMP participating
servicers and investors perform modifications,
possibly reduce losses,
and help the United
States housing market grow stronger.
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 stay
in their homes. Notes:
• The material in this presentation applies to mortgages not held by a GSE (Fannie Mae and Freddie Mac).
• This presentation is directed to servicers who signed the Servicer Participation Agreement and related documents (SPA).
By participating in HAMP,
a servicer, investor and
borrower become
eligible for incentive
compensation from the
U.S. Department of the
Treasury.
Overview
1MP_Phase 2 2
4 Making Home Affordable | February 2012
5 Making Home Affordable | February 2012
Agenda HAMP Eligibility Criteria Phase 1
Communication and Borrower Notices Phase 1
Protections Against Unnecessary Foreclosure Phase 1
HAMP Documents and External Reporting Requirements Phase 3
Alternative Loss Mitigation Options Phase 3
Underwriting Phase 2
HAMP Evaluation Process Phase 2
Initial Package Phase 2
Trial Period Plan Phase 3
Permanent Modification Phase 3
Underwriting
HAMP Evaluation Process
Initial Package
6 Making Home Affordable | February 2012
The Initial Package
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 3
7 Making Home Affordable | February 2012
IRS form 4506-T or
4506T-EZ
Evidence of
Income
Initial Package
Request for
Mortgage Assistance (RMA)
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Dodd-Frank
Certification
8 Making Home Affordable | February 2012
Request for Mortgage Assistance Form
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
9 Making Home Affordable | February 2012
Servicer determines eligibility within 30 calendar days
• Servicer sends borrower additional Incomplete Information notice • Extends submission 15 additional calendar days
• Servicer sends borrower Incomplete Information Notice • Borrower has 30 calendar days to submit requested information
Servicer has 10 business days to communicate decision to borrower
Initial Package – Process
Non-Approval Notice
• Borrower submits Initial Package to servicer • Servicer sends written acknowledgement to borrower within 10
business days
Incomplete Information
Servicer Communication
Servicer Review
Submission & Acknowledgement
TPP Notice
-or-
Non-Approval Notice
Servicer sends borrower
NO
Initial Package
complete? YES
YES
NO
Package complete
after 30 days?
YES
NO
Package complete
after 45 days?
Incomplete Information
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 4
10 Making Home Affordable | February 2012
Non-Approval Notice
Sent to homeowners who have not been approved for a TPP or permanent modification. Sent to homeowners who have not been approved for a TPP or permanent modification.
Includes a description of other foreclosure alternatives including steps the homeowner should take to be considered for those options. Includes a description of other foreclosure alternatives including steps the homeowner should take to be considered for those options.
If an NPV evaluation was conducted, includes all the NPV Data Input Fields and Values used in the NPV evaluation. If an NPV evaluation was conducted, includes all the NPV Data Input Fields and Values used in the NPV evaluation.
11 Making Home Affordable | February 2012
Credit Report C
Evidence of Income B
Request for Mortgage Assistance (RMA) D
IRS Form 4506-T A
Test Your Knowledge! What documentation is NOT included in the Initial Package?
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Credit Report
12 Making Home Affordable | February 2012
HAMP Evaluation Process
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 5
13 Making Home Affordable | February 2012
HAMP Evaluation Process To determine eligibility for HAMP, occupancy and income must be
verified.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
To document and support occupancy, a credit report must be obtained for all HAMP applicants. To document and support occupancy, a credit report must be obtained for all HAMP applicants.
The servicer’s Verification Policy must describe how the servicer will determine a borrower's monthly gross income and how the servicer will calculate non-traditional income scenarios such as underemployment, recent employment, overtime, seasonal or sporadic income.
A property that was non-owner occupied at origination, but is now occupied by the borrower, may be
considered the borrower’s principal residence.
The servicer’s Verification Policy must describe how the servicer will determine a borrower's monthly gross income and how the servicer will calculate non-traditional income scenarios such as underemployment, recent employment, overtime, seasonal or sporadic income.
A property that was non-owner occupied at origination, but is now occupied by the borrower, may be
considered the borrower’s principal residence.
14 Making Home Affordable | February 2012
Wage or Salary Wage or Salary
Rental Income
Other Earned Income
Self-Employment Income
Benefit Income
Alimony, Separation Maintenance, and Child Support Income
Passive and Non-Wage Income Passive and Non-Wage Income
Rental Income
Other Earned Income
Self-Employment Income
Benefit Income
Alimony, Separation Maintenance, and Child Support Income
HAMP Evaluation Process The following are examples of income types:
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
15 Making Home Affordable | February 2012
Non-Borrower occupant household
income – voluntary
Non-Borrower occupant household
income – voluntary
All borrowers on the mortgage note,
regardless of whether they reside
in the property or not
All borrowers on the mortgage note,
regardless of whether they reside
in the property or not
HAMP Evaluation Process
Whose Income
Should Be
Considered?
Note: If a borrower is divorced and has been removed from
the title through a divorce decree and is not contributing to
the monthly mortgage payment – the servicer may use only
the income of the borrower who is occupying the property at
the time of the HAMP evaluation.
Note: A non-borrower is someone who is not on the original note
(and may or may not be on the original security instrument),
but is contributing to the overall household expenses.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 6
16 Making Home Affordable | February 2012
HAMP Evaluation Process Wage or Salary
Each wage-earning (W-2)
borrower must provide a
copy of two recent
pay stubs:
• Pay stubs must not be more
than 90 days old at time of
submission.
• Pay stubs must include the
borrower’s year-to-date earning
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
17 Making Home Affordable | February 2012
HAMP Evaluation Process
Name and address of the borrower’s employer 1
Borrower home address known by
employer 2
Rate of pay 3
Marital status 4
Pay ending date 6
How often this borrower is paid 7
Current pay period gross earnings and the
hours worked during this pay period 8
Year-to-date gross income and hours 9
Commission Income 10
Federal Taxes 11
Deductions 12
Number of exemptions 5
1
2
3
4
6
7
8 9
11
12
5
10
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Wage or Salary – Example Paystub
18 Making Home Affordable | February 2012
Self-employed borrower must provide
his/her most recent quarterly or
year-to-date profit and loss statement.
When reviewing the borrower’s profit
and loss statement to calculate the
gross income, servicer must include the
net profits:
•Salary or draw amounts and depreciation
and depletion (if applicable).
When reviewing the borrower’s profit
and loss statement to calculate the
gross income, servicer must include the
net profits:
•Salary or draw amounts and depreciation
and depletion (if applicable).
Self-employed borrower must provide
his/her most recent quarterly or
year-to-date profit and loss statement.
HAMP Evaluation Process
Self-Employment
Income
Note: At the servicer’s discretion, if consistent with the servicer’s Verification Policy, four consecutive months of bank
statements may be obtained in lieu of the profit and loss statement or if the information in the profit and loss
statement is insufficient.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 7
19 Making Home Affordable | February 2012
HAMP Evaluation Process 1
3
4
2
Dates which the Profit
and Loss is covering
1
Take the total income of $63,500
and divide by 3 months - we can
determine the borrowers monthly
income to be $21,166.
Net Profit amounts 2 $49,500
Officer wages and
salaries 3 + $10,000
Depreciations 4 + $4,000
Total Income Jan – Mar 2010 (3 months)
= $63,500
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Self Employment Income – Example Profit and Loss
20 Making Home Affordable | February 2012
Rental Income Considerations
• For borrowers who have a
previous rental income
history, obtain a copy of most recent tax year IRS Schedule
E (Supplemental Income and
Loss) to determine income.
• For borrowers without a
previous rental income history, obtain a copy of the
current lease agreement and
bank statements or copies of
the cancelled rental checks
evidencing deposits or current lease agreement and
cancelled rent checks.
Income from Primary
Residence
Use 75 percent of the monthly gross rental income, with the
remaining 25 percent
considered vacancy loss and
maintenance expense.
Income from Non-Primary
Residence
Use 75 percent of the monthly gross rental income, reduced
by the monthly debt principal,
interest, taxes, and insurance,
including mortgage insurance,
and homeowners association fees, if applicable.
Determining the Income
Income from Primary
Residence
Use 75 percent of the monthly gross rental income, with the
remaining 25 percent
considered vacancy loss and
maintenance expense.
Income from Non-Primary
Residence
Use 75 percent of the monthly gross rental income, reduced
by the monthly debt principal,
interest, taxes, and insurance,
including mortgage insurance,
and homeowners association fees, if applicable.
Rental Income Considerations
• For borrowers who have a
previous rental income
history, obtain a copy of most recent tax year IRS Schedule
E (Supplemental Income and
Loss) to determine income.
• For borrowers without a
previous rental income history, obtain a copy of the
current lease agreement and
bank statements or copies of
the cancelled rental checks
evidencing deposits or current lease agreement and
cancelled rent checks.
HAMP Evaluation Process
Determining the Income
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
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HAMP Evaluation Process Rental Income Example
Non-Primary Residence
Primary Residence
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 8
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Other Earned Income
• Bonus, commission
fees, housing
allowance, tips and overtime.
• Borrower must provide
reliable third-party
documentation (e.g.,
an employment contract or printouts
documenting tip
income).
Benefit Income
• Social security,
disability, survivor
benefits, pension, public assistance,
adoption assistance
and food stamps.
• Borrower must provide
documentation evidencing the
amounts they will
receive, frequency of
the benefits and
evidence of receipt.
Alimony, Separation Maintenance, and Child Support Income
• Must be voluntarily
provided by the
borrower.
• Borrower must provide:
•Divorce decree,
separation agreement
or other legal
documents filed with
the court.
•Evidence of receipt of
payment – 2 most
recent bank
statements or deposit
slips.
Passive and Non-Wage Income
• Income such as rental,
bonus, and tips may be
included without
documentation.
Income that is NOT included when evaluating a borrower for HAMP
• Income tax refunds
• Non-borrower
non-household income
• Grants, including
mortgage assistance
payments
• Severance payments
• Unemployment benefits
Income that is NOT included when evaluating a borrower for HAMP
• Income tax refunds
• Non-borrower
non-household income
• Grants, including
mortgage assistance
payments
• Severance payments
• Unemployment benefits
HAMP Evaluation Process Additional Types of Income
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Other Earned Income
• Bonus, commission
fees, housing
allowance, tips and overtime.
• Borrower must provide
reliable third-party
documentation (e.g.,
an employment contract or printouts
documenting tip
income).
Benefit Income
• Social security,
disability, survivor
benefits, pension, public assistance,
adoption assistance
and food stamps.
• Borrower must provide
documentation evidencing the
amounts they will
receive, frequency of
the benefits and
evidence of receipt.
Alimony, Separation Maintenance, and Child Support Income
• Must be voluntarily
provided by the
borrower.
• Borrower must provide:
•Divorce decree,
separation agreement
or other legal
documents filed with
the court.
•Evidence of receipt of
payment – 2 most
recent bank
statements or deposit
slips.
Passive and Non-Wage Income
• Income such as rental,
bonus, and tips may be
included without
documentation.
23 Making Home Affordable | February 2012
Monthly Principal Residence PITIA payments. MI premiums.
All closed-end subordinate mortgages. HELOC payments - use the minimum monthly payment reported
on the credit report.
If supplied - alimony, child support and separate maintenance
payments with more than ten months remaining.
Revolving or open-end accounts, regardless of the balance.
If no monthly payment shown, use 3 percent of the
outstanding balance.
Monthly Secondary home PITIA payments.
Installment debts with more than ten months of remaining payments or account with no payments, listed as deferred or forbearance, payment must be verified.
Negative net rental income.
Car lease payments, regardless of the number of payments
remaining.
Revolving or open-end accounts, regardless of the balance.
If no monthly payment shown, use 3 percent of the
outstanding balance.
Monthly Secondary home PITIA payments
HELOC payments - use the minimum monthly payment reported
on the credit report.
If supplied - alimony, child support and separate maintenance
payments with more than ten months remaining.
Car lease payments, regardless of the number of payments
remaining.
Negative Net Rental Income
Monthly Principal Residence PITIA payments.
All closed-end subordinate mortgages.
Installment debts with more than ten months of remaining payments or account with no payments, listed as deferred or forbearance, payment must be verified.
MI premiums.
HAMP Evaluation Process Verifying Monthly Gross Expenses
Monthly gross expenses include the monthly charges described in the following list:
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
24 Making Home Affordable | February 2012
HAMP Evaluation Process
Borrowers with back-end ratios of 55 percent or more must agree in writing to obtain HUD-approved
counseling as a condition of receiving a HAMP modification, even if they recently completed counseling.
Borrowers with back-end ratios of 55 percent or more must agree in writing to obtain HUD-approved
counseling as a condition of receiving a HAMP modification, even if they recently completed counseling.
Face to face counseling sessions are encouraged, however telephone sessions are permitted.
Servicers must send a HAMP Counseling letter to borrowers informing them of the counseling
requirement.
Face to face counseling sessions are encouraged, however telephone sessions are permitted.
Servicers must send a HAMP Counseling letter to borrowers informing them of the counseling
requirement.
HUD Counseling Requirement
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 9
25 Making Home Affordable | February 2012
Unemployment Benefits B
Non-Borrower Household Income D
Social Security Disability A
Child Support C
Test Your Knowledge! What income is excluded for monthly gross income calculation under HAMP?
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Unemployment Benefits
26 Making Home Affordable | February 2012
Underwriting
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
27 Making Home Affordable | February 2012
To qualify for HAMP, the verified
monthly gross income must
confirm that the borrower’s
monthly mortgage payment ratio prior to the modification is greater
than 31 percent.
The monthly mortgage payment
ratio is the ratio of the borrower’s current monthly mortgage
payment to the monthly gross
income of all borrowers on the
mortgage note, whether or not
those borrowers reside in the property.
For adjustable rate
mortgage (ARM)
loans that are scheduled to reset
more than 120
days after the
evaluation – the
monthly payment used in the
determination must
be the borrower’s
current scheduled
monthly mortgage payment and the
note interest rate
in effect at the time
of evaluation
For adjustable rate
mortgage (ARM)
loans that are scheduled to reset
more than 120
days after the
evaluation – the
monthly payment used in the
determination must
be the borrower’s
current scheduled
monthly mortgage payment and the
note interest rate
in effect at the time
of evaluation
To qualify for HAMP, the verified
monthly gross income must
confirm that the borrower’s
monthly mortgage payment ratio prior to the modification is greater
than 31 percent.
The monthly mortgage payment
ratio is the ratio of the borrower’s current monthly mortgage
payment to the monthly gross
income of all borrowers on the
mortgage note, whether or not
those borrowers reside in the property.
Underwriting The Borrower’s Monthly Mortgage Payment Ratio
For ARM loans
that are scheduled
to reset within 120 days of the
evaluation –the
fully amortizing
payment
determined by the remaining term of
the mortgage, the
current unpaid
principal balance
and the reset rate.
For ARM loans
that are scheduled
to reset within 120 days of the
evaluation –the
fully amortizing
payment
determined by the remaining term of
the mortgage, the
current unpaid
principal balance
and the reset rate.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
1MP_Phase 2 10
28 Making Home Affordable | February 2012
Borrower’s monthly mortgage payments must include escrow
amount, unless prohibited by applicable law.
Prior to beginning a trial period, servicers must:
Perform an escrow analysis for taxes and insurance. When performing the escrow analysis,
the servicer must take into consideration any taxes and insurance payments that may come
due during the trial period. Amount previously advanced or amounts that come due during
the trial period should be capitalized.
Establish an escrow account for borrowers who currently do not have one.
Determine the exact escrow payment required.
Perform an escrow analysis for taxes and insurance. When performing the escrow analysis,
the servicer must take into consideration any taxes and insurance payments that may come
due during the trial period. Amount previously advanced or amounts that come due during
the trial period should be capitalized.
Establish an escrow account for borrowers who currently do not have one.
Determine the exact escrow payment required.
Underwriting Escrow Accounts and Evaluation
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Prior to beginning a trial period, servicers must:
Borrower’s monthly mortgage payments must include escrow
amount, unless prohibited by applicable law.
29 Making Home Affordable | February 2012
Homeowners Insurance = $500.00
• Due – August
• Borrower Analysis for modification – May
• Potential Trial Start – June
June Trial 1 July Trial 2 Aug Trial 3
1st Tax Installment
$1,000.00
Homeowners Insurance
$500.00
Amounts Due During the Trial
$1,500.00
Amounts to Capitalize if applicable by law
$1,500.00
Homeowners Insurance = $500.00
• Due – August
• Borrower Analysis for modification – May
• Potential Trial Start – June
June Trial 1 July Trial 2 Aug Trial 3
1st Tax Installment
$1,000.00
Homeowners Insurance
$500.00
Amounts Due During the Trial
$1,500.00
Amounts to Capitalize if applicable by law
$1,500.00
Underwriting Escrow Analysis Example
County Taxes = $2,000.00
• 1st Installment Due – July
• 2nd Installment Due – December
County Taxes = $2,000.00
• 1st Installment Due – July
• 2nd Installment Due – December
If the initial analysis
identifies a shortage
for future payments,
the servicer must take
steps to eliminate.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
30 Making Home Affordable | February 2012
Step 4
Principal Forbearance:
If necessary, forbear principal.
Step 4
Principal Forbearance:
If necessary, forbear principal.
Step 3
Extend the Term:
Extend the term without exceeding 480 months.
Step 3
Extend the Term:
Extend the term without exceeding 480 months.
Step 2
Reduce the Rate:
Reduce the borrower’s current rate to as low as two percent.
Step 2
Reduce the Rate:
Reduce the borrower’s current rate to as low as two percent.
Underwriting Standard Modification Waterfall The target monthly housing ratio is defined as 31 percent of the borrower’s monthly gross income - Servicer must follow the waterfall steps in order and as necessary until the 31 percent target is achieved.
Principal Forgiveness - Servicers may forgive principal either up front or on a deferred basis under the Principal Reduction Alternative (PRA) to achieve the target monthly mortgage payment. Up front principal forgiveness may be granted on a standalone basis or before any step in the standard waterfall process.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Step 1
Capitalize:
Capitalize accrued interest, out-of-pocket servicing expenses.
Step 1
Capitalize:
Capitalize accrued interest, out-of-pocket servicing expenses.
Additional guidance can be found in the Handbook located on HMPadmin.com
1MP_Phase 2 11
31 Making Home Affordable | February 2012
Underwriting Variation from the Standard Modification Waterfall In accordance with investor guidelines, servicers have the option of providing borrowers with a more favorable
modification than that required by HAMP, which may call for a deviation from the standard modification waterfall.
Servicers may agree to a modification where the interest rate does not step up after five years or where
the interest rate is reduced to less than 2.0 percent.
Servicers may agree to a modification where the interest rate does not step up after five years or where
the interest rate is reduced to less than 2.0 percent.
Servicers may agree to a modification that reduces the borrower’s monthly mortgage payment ratio
below 31 percent.
Servicers may agree to a modification where additional principal forbearance is substituted for extending
the term as needed to achieve the target monthly mortgage payment ratio of 31 percent.
Servicers may agree to a modification that reduces the borrower’s monthly mortgage payment ratio
below 31 percent.
Servicers may agree to a modification where additional principal forbearance is substituted for extending
the term as needed to achieve the target monthly mortgage payment ratio of 31 percent.
Examples of acceptable deviations include:
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Note: Investor guidelines may restrict or prohibit a modification step in the standard modification waterfall. If the servicer partially
performs or skips a modification step, the modification still qualifies for HAMP. Servicers must maintain evidence in the loan file
documenting the nature of any deviation from taking any sequential modification step in the modification waterfall.
32 Making Home Affordable | February 2012
PRA is designed to offer
mortgage relief to eligible
homeowners whose homes are
worth significantly less than the
remaining amounts owed under
their first lien mortgage loans.
Servicers are not required to
participate in PRA, but are
required to evaluate all
HAMP-eligible loans with a
mark-to-market loan-to-value
(MTMLTV) greater than 115
percent to determine if a
principal reduction is
beneficial.
If the evaluation shows the net
present value (NPV) for a
HAMP modification using PRA
is positive, servicers are
encouraged to offer the
principal reduction to the
borrower.
Servicers are not required to
participate in PRA, but are
required to evaluate all
HAMP-eligible loans with a
mark-to-market loan-to-value
(MTMLTV) greater than 115
percent to determine if a
principal reduction is
beneficial.
If the evaluation shows the net
present value (NPV) for a
HAMP modification using PRA
is positive, servicers are
encouraged to offer the
principal reduction to the
borrower.
Underwriting Principal Reduction Alternative (PRA)
PRA is designed to offer
mortgage relief to eligible
homeowners whose homes are
worth significantly less than the
remaining amounts owed under
their first lien mortgage loans.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
33 Making Home Affordable | February 2012
Step 4
Principal Forbearance:
If necessary, forbear principal.
Step 4
Principal Forbearance:
If necessary, forbear principal.
Step 3
Extend the Term:
Extend the term without exceeding 480 months.
Step 3
Extend the Term:
Extend the term without exceeding 480 months.
Step 2
Reduce the Rate:
Reduce the borrower’s current rate to as low as two percent.
Step 2
Reduce the Rate:
Reduce the borrower’s current rate to as low as two percent.
PRA Step
Principal Reduction Alternative:
Reduce the UPB until the target monthly payment is achieved.
PRA Step
Principal Reduction Alternative:
Reduce the UPB until the target monthly payment is achieved.
Underwriting Alternative Modification Waterfall
Principal Forgiveness - Servicers may forgive principal either up front or on a deferred basis under the Principal Reduction Alternative (PRA) to achieve the target monthly mortgage payment. Up front principal forgiveness may be granted on a standalone basis or before any step in the standard waterfall process.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Additional guidance can be found in the Handbook located on HMPadmin.com
Step 1
Capitalize:
Capitalize accrued interest, out-of-pocket servicing expenses.
Step 1
Capitalize:
Capitalize accrued interest, out-of-pocket servicing expenses.
1MP_Phase 2 12
34 Making Home Affordable | February 2012
Principal Forgiveness D
Capitalization B
Reduce the Interest Rate A
Term Extension C
Test Your Knowledge! Which of the following is NOT a step in the Standard Modification Waterfall?
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Principal Forgiveness
35 Making Home Affordable | February 2012
Net Present Value (NPV)
All loans that meet the
HAMP eligibility
criteria and are deemed to be in
imminent default or
delinquent must be
evaluated using the
standardized NPV test.
All loans that meet the
HAMP eligibility
criteria and are deemed to be in
imminent default or
delinquent must be
evaluated using the
standardized NPV test.
Positive NPV Result
– Servicer must offer
the borrower a
modification.
Positive NPV Result
– Servicer must offer
the borrower a
modification.
Negative NPV
Result – At
servicer’s discretion
to perform the modification.
Negative NPV
Result – At
servicer’s discretion
to perform the modification.
Alternative Modification
Waterfall:
Positive Result – At
servicer’s
discretion to perform a loan
modification
utilizing PRA.
Alternative Modification
Waterfall:
Positive Result – At
servicer’s
discretion to perform a loan
modification
utilizing PRA.
Phase 3 Commencement
Phase 2 Evaluation
Phase 1 Engagement
Resources are
available to servicers on
HMPadmin.com to
assist them in
performing the
NPV test.
Resources are
available to servicers on
HMPadmin.com to
assist them in
performing the
NPV test.
36 Making Home Affordable | February 2012
1MP_Phase 2 13
37 Making Home Affordable | February 2012
Resources
• Contact HAMP Servicer Integration Team E-
mail: [email protected]
Additional Resources
• Step-by-step job aids
• NPV tools and documents
• Reporting resources
• Live webinar training calendars
Resources located on
HMPadmin.com include:
38 Making Home Affordable | February 2012
Questions