MHA Housing Power Point

"An Update on the
Making Home Affordable Plan"

“Saving one home at a time”

Meet Your Presenter
CORA R. FULMORE
 President of the Mortgage & Credit Center, LLC since 1997
and Co-Chair of NCHEC Advisory Board
 MCC provides direct assistance in the area of:
◦ Budgeting, money management, credit rebuilding, homeownership and
foreclosure prevention
 More than 25 years of experience in the area of credit and
mortgage counseling.
 Certified trainer with NeighborWorks America, Freddie Mac,
HUD, local & state government.
 Host of the “Cora Fulmore Show” WOKB 1680 AM Station
 Scheduled to appear on WHLV-TV 52 –Trinity Broadcasting
Network
 MCC also provide assistance to non-profits in the area of
capacity building and program development.
Developed & Presented by the Mortgage & Credit Center, LLC

 Take a look at the program’s success,
challenges and projections
 To discuss recent changes to the Home
Affordable Refi and Mod Plan
 Give a better understanding of the plan
from a housing counselor’s perspective
 Review documentation requirements


Through August 2009, 47 loan service providers have offered
more than 570,000 homeowners loan modifications through the
(HAMP) program. Of these, 47 service providers have
successfully converted over 360,000 modifications. However,
the House Financial Services Committee, said they want to see
more conversion of trial offers from loan service providers —
namely 500,000 by November 1.


The Government is following up


August 09 Report

Source: http://www.treas.gov/press/releases/docs/

September 09 Report


Question
How has the MHA program impacted your
clients?
Overall, would you say that lenders are
working with you utilizing the program as
intended?


FLORIDA 8/09 – 62,401


Intent of the Plan

 To get the economy and the housing market
back on track
 Comprised of the Home Affordable
Modification and the Home Affordable
Refinance Plan
 Designed to insure long term sustainability.


What type of loans are eligible?

Home Affordable Home Affordable
Refinance Modification
Is only available for Most conventional
conforming loans loans including prime,
owned or securitized subprime, adjustable,
by Fannie Mae and loans owned by lenders
Freddie Mac. and loans in securities
are eligible.


How do we get started?

1-800-7FANNIE or go to
www.fanniemae.com/homeaffordable
or
1-800-FREDDIE (8am to 8pm EST)
www.freddiemac.com/avoidforeclosure


Developed by www.onlinehousingtraining.com

Your client can help you help them…

Know who is participating
 Fannie Mae and Freddie Mac
are required to participate
 Private Investors and Servicers
participation is voluntary
 As contracts are signed, a list
of participating servicers will be
available on the internet at

www.financialstability.gov


Program Updates


FHA HAMP


Making Home Affordable/FHA
 Available for FHA loans that are at least one
month delinquent, but no more than 12
months delinquent.
 Homeowner cannot have intentionally
defaulted.
 Modification will be re-amortized over 30
years.
 Mortgagee must give the mortgagor the
opportunity to qualify for the program before
proceeding with the foreclosure process


FHA-HAMP Partial Claim
 Mortgagees can use a Partial Claim in order
to reduce principal with the goal of achieving
a 31% DTI for the mortgagor.
 The maximum one-time only principal
reduction on the modification is determined
by multiplying the outstanding principal
balance of the existing mortgage as of the
date of default by 30 percent, reduced by
arrearage amounts advanced to cure the
default for up to 12 months PITI and
allowable foreclosure costs.


FHA-HAMP Partial Claim Example
John and Anna – Reduction of income To fulfill the 31% Housing Ratio

 Delinquent: 3 months  New Payment: $1,085
 UPB: $150,000  Escrow & MIP $300
 Income: $3,500  New PI: $785
 Recurring  Rate: 6% Assumption

Debt: $800  New Mortgage: $130,931
 Principle
• Payment: $1,220 Reduction: $19,069
• Escrow: $300  Backend Ratio: 53.9%
• P & I: $920

• Maximum principal deferment is $41,340 (30% of $150,000, less the $3,660 delinquency, or
$45,000 - $3,660)
• Based on their gross income, mortgagor is eligible only for a principal deferment of $19,069
plus $3,660 arrearages (which would include any foreclosure costs incurred to that point, in
accord with Mortgagee Letter 2008-21)
• Total Partial Claim of $22,729

Home Affordable Refinance
Freddie Mac Fannie Mae
• Must be current • Must be current

• 1st mortgage must be • 1st mortgage must be
125% or less of current 125% or less of current
market value market value
ENDS JUNE 10,nd2010
• 2nd
lien holder MUST • 2 lien holder MUST
AGREE to subordinate AGREE to subordinate

• Must obtain the • May obtain the refinance
refinance from the from any mortgage
current servicer originator or current
servicer


Other Requirements
 Owner occupied properties
 Fully documented income to support the
new mortgage debt
 No “cash out” allowed, (exception closing
costs)
 If the CLTV exceeds 125%, all junior lien
holders must subordinate and the new LTV
must not exceed 125%


Retirement funds disability
Documentation Needed 
 Death benefits
 Unemployment benefits
•Hardship Affidavit / Imminent Default  Insurance policies
•Most recent signed income tax return  Income borrower can provide
•Proof of residency (e.g., current utility bill) reasonable documentation
•IRS Form 4506-T  Base wages
•Borrower’s monthly income documentation  Salaries overtime
•Credit report on each borrower
•Form 1126, Borrower Financial Statement
 Commissions
•Borrower’s other indebtedness (e.g., alimony)  Fees
•Property Value (AVM / BPO)  Tips
 Bonuses
 Housing allowances
 Annuities
 Compensation for personal
services
 Social Security payments
 Pensions and any documented
income


Home Affordable Modification

 The mortgage originated on or before January
1, 2009.
 Loans modified under this program will have to
reduce the front end DTI to 38% by the lender
to comply with program guidelines
 The US Treasury Department will then match,
dollar for dollar, further reductions to 31%
front end DTI for the borrower


Additional Criteria
 The property must be owner occupied,
single family 1-4 unit property, no vacant
properties are eligible
 The home must be a primary residence
and verified by prior years tax return or
current utility bill
 First lien balances must be equal to or
less than $729,750


Net Present Value
The NPV model used in the HMP takes into account the principal
factors that can influence the cash flow, including:
1. The value of the home relative to the size of the mortgage.
2. The likelihood that the loan will be foreclosed on.
3. Trends in home prices.
4. The cost of foreclosure including: legal expenses, lost interest
during the time required to complete the foreclosure action,
property maintenance costs, and expenses involved in reselling
the property.
5. The cost of the modification including:
• a lower monthly payment from the borrower,
• the likelihood the borrower will default even after the loan is
modified,
• financial incentives provided by the government, and
• the likelihood that a loan will be paid off before its term expires
(prepayment probability).

Net Present Value Test
Servicers must perform the NPV Test at least twice:
1. When qualifying the Borrower for the Trial Period
2. When finalizing the Modification

If the NPV Test is Negative and principal forbearance is
needed to achieve the target payment, the mark-to-market
LTV ratio cannot be less than 100%.

If the mark-to-market LTV ratio is less the 100%, the
borrower can only qualify for HMP if the result is NPV
positive, ( there are some exceptions - Section C65.7(c)
If the NPV Test is Positive, the servicer will proceed with the
modification process


Underwrite the Borrower:
 Verifying Income/Target Payment
 Pay stubs - wage earners/profit &
loss (self-employed)
RAYMOND & PEARL
 Signed complete copy of most
recent tax return Income: $4,000.00
 All documented sources, including
Max PITIA 31%: $1,240.00
rental income and unemployment
compensation Taxes 1/12: $ 200.00
 Other documented income, if Insurance 1/12: $ 120.00
requested IRS Form 4506-T Association Fee 1/12: $ 75.00
Example: Net Principal & Interest: $ 845.00
Gross monthly income
MONTHLY INCOME: $4,000 x .31 =
$1,240 Target PITIA(S)= shortage)
payment


MODIFICATION WATER FALL SYSTEM
1. Capitalization of Arrearages: Accrued interest, real estate taxes and other
arrearages (excluding late fees) may be capitalized and added to the principal
balance of the mortgage loan.

2. Interest Rate Reduction: First, the interest rate will be reduced (subject to a
floor of 2%) in increments of 0.125% in order to bring the monthly payment as
close to the target Front-End DTI level as possible without going below 31%.

3. Reamortization of Principal: Next, if the interest rate reduction has not
achieved the target Front-End DTI, the servicer shall extend the term of the
mortgage loan or the length of amortization, as applicable, to up to 40 years in
order to reach the target Front-End DTI ratio.

4. Principal Forbearance: Next, if the interest rate reduction and
reamortization have not achieved the target Front-End DTI, the servicer shall
set aside principal to reach the target Front-End DTI ratio.

5. Principal Forgiveness: While not a requirement under the standard waterfall,
servicers have the option to forgive principal at any point in the waterfall.


Chase, WaMu & EMC


Citi Mortgage

http://www.citigroup.com/citi/citizen/community/homeownershippreservation/


Program Updates

 Further updates will be posted as
available at www.financialstability.gov


MHA Housing Power Point

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