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Making Home Affordable | February 2012
Making Home Affordable (MHA)
Incentive Compensation for HAMP, 2MP, and HAFA℠
2 Making Home Affordable | February 2012
Course Objectives
This course will provide:
• A comprehensive overview of MHA incentive compensation on the following programs: HAMP, 2MP and HAFA
• Detailed information on incentives and accruals
• Guidance on Official Monthly Report (OMR) submissions and their impact on incentives
• Assistance in identifying anniversary incentives on monthly reports posted to the HAMP Reporting Tool
• A definition of interim month
• Guidance in managing servicer anniversary incentive inquiries
• A review of incentive compensation
• A list of MHA Resources
• A forum for questions and answers
3 Making Home Affordable | February 2012
HAMP Incentive Payment Types
Entity Payment Name
Servicer Servicer Incentive Payment
Pay-for-Success Payment
Borrower Pay-for-Performance Success Payment
Investor (Non-GSE)
Monthly Reduction Cost Share Payment
Current Borrower One-Time Bonus Payment
Home Price Decline Protection (HPDP) Incentive Payment
Principal Reduction Alternative℠ Incentive Payments
Note: No incentives will be paid unless the servicer has reported to the Program Administrator any required servicer or loan set-up data
4 Making Home Affordable | February 2012
HAMP Incentive Payment Types - Servicer
Compensation Amount
1) For loans less than or equal to 120 days delinquent as of the TPP Effective Date - $1,600
2) Between and including 121 and 210 days delinquent as of the TPP Effective Date - $1,200
3) Greater than 210 days delinquent as of the TPP Effective Date - $400
Frequency One-time payment
Timing Payable in the first month of the official/permanent modification
Conditions TPP must be successfully completed
Servicer Incentive Payment
5 Making Home Affordable | February 2012
HAMP Incentive Payment Types – Servicer
Compensation Amount
Equal to the lesser of $1,000 ($83.33/month) or one-half of the reduction in the borrower’s annualized monthly mortgage payment
Frequency Accrued monthly for the first three years of the permanent modification
Timing Payable annually in the month of the anniversary of the first TPP payment due date
Conditions
• Borrower’s monthly mortgage payment must be reduced through HAMP by at least six percent
• Loan must be in good standing and not paid in full
• OMR must be received
Note: If the loan ceases to be in good standing or is paid in full, the servicer will forfeit any incentive payments that have accrued but are unpaid and will cease to be eligible for any further incentive payments for that loan after that time, even if the borrower subsequently cures their delinquency.
Pay-for-Success Payment
6 Making Home Affordable | February 2012
HAMP Incentive Payment Types - Borrower
Compensation Amount
Equal to the lesser of $1,000 ($83.33/month) or one-half of the reduction in the borrower’s annualized monthly mortgage payment for each month a timely payment is made
Frequency Accrued monthly for the first five years of the permanent modification
Timing Payable annually in the month of the anniversary of the first TPP payment due date
Conditions
• Borrower’s monthly mortgage payment must be reduced through HAMP by at least six percent
• Loan must be in good standing and not paid in full at the time the incentive is paid
• Borrower makes timely monthly payments for accrual • OMR must be received
Note: If the loan ceases to be in good standing or is paid in full, the borrower will forfeit any incentive payments that have accrued but are unpaid and will cease to be eligible for any further incentive payments after that time, even if the borrower subsequently cures his or her delinquency.
Pay-for-Performance Success Payment
7 Making Home Affordable | February 2012
HAMP Incentive Payment Types – Borrower
Number of Months Accrued = 3
Total Anniversary Incentive = $83.33 (incentive amount) X 3 (total months accrued) = $249.99
Month 1 2 3 4 5 6 7 8 9 10 11 12
Payment One PMT Received
One PMT Received
One PMT Received
No
PMT
No
PMT
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
Accrued Borrower Incentive
$83.33 $83.33 $83.33 0 0 0 0 0 0 0 0 0
Example 1: Borrower misses two payments and does not bring loan current
8 Making Home Affordable | February 2012
HAMP Incentive Payment Types – Borrower
Number of Months Accrued = 10
Total Anniversary Incentive = $83 (incentive payment) X 10 (total months accrued) = $833.33
Example 2: Borrower misses two payments and brings loan current
Month 1 2 3 4 5 6 7 8 9 10 11 12
Payment One PMT Received
One PMT Received
One PMT Received
No
PMT
No
PMT
One PMT Received
+
2PMTS
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
Accrued Borrower Incentive
$83.33 $83.33 $83.33 0 0 $83.33
+
$166.66
$83.33 $83.33
$83.33
$83.33
$83.33
$83.33
9 Making Home Affordable | February 2012
HAMP Incentive Payment Types - Investor
Compensation Amount
Equal to one-half of the dollar difference between (i) the borrower’s monthly payment (principal and interest only) under the modification calculated at 31 percent of the borrower’s monthly gross income and (ii) the lesser of:
• What the borrower’s monthly payment (principal and interest only) would be at a 38 percent monthly mortgage payment ratio; or
• The borrower’s pre-modification monthly payment (principal and interest only)
Frequency Payable monthly for up to five years of the permanent modification
Timing Payable monthly beginning the month after the permanent modification effective date
Conditions • Loan must be in good standing and not paid in full
• Permanent modification must be effective
• OMR must be received
Monthly Reduction Cost Share Payment
10 Making Home Affordable | February 2012
HAMP Incentive Payment Types - Investor
Compensation Amount
$1,500
Frequency One-time payment for each completed modification
Timing Payable in the first month of the permanent modification becomes effective
Conditions
• The borrower must make their payment in the intervening month prior to the TPP Effective date; or
• The borrower agrees to start their trial period on the first day of the next month.
Current Borrower One-Time Bonus Payment
11 Making Home Affordable | February 2012
HAMP Incentive Payment Types - Investor
Compensation Amount
HPDP Incentive Amount = HPDP Index Value * UPB Quintile Payment * mark-to-market LTV Weighting Factor
Frequency Accrued monthly for the first two years of the permanent modification
Timing Payable annually on each the first anniversary and the second anniversary of the date on which the first trial period payment is due under the TPP
Conditions
• TPP Effective Date and NPV Date must be on or after September 1, 2009
• Loan must be in good standing and not paid in full
• Borrower’s monthly mortgage payment must be reduced by at least six percent
• OMR must be received
Note: If loan disqualifies or pays off before end of two year period, amount accrued when loan was in good standing is paid out to investor in month it lost good standing or paid off as reported to the HAMP Reporting Tool.
Home Price Decline Protection (HPDP) Incentive
12 Making Home Affordable | February 2012
Compensation Amount
Paid at $0.18 per dollar of principal reduction amount for loans that were more than six months past due at any time during the 12-month period prior to NPV evaluation date, otherwise the following applies:
• $0.63 per dollar of the principal reduction amount for mark-to-market LTV less than 115% and equal to or greater than 105%
• $0.45 per dollar of the principal reduction amount for mark-to-market LTV of 115%-140%
• $0.30 per dollar of the principal reduction amount for mark-to-market LTV greater than 140%
Frequency Payable annually for the first three years of the permanent modification.
Timing Payable annually in the month of the anniversary of the first trial period payment due date.
Conditions
• Only paid if the modification terms reflect the target monthly mortgage payment ratio
• Paid only in conjunction with principal reduction that is deferred over three years in accordance with the program
• Loan must be in good standing and not paid in full
• OMR must be received
HAMP Incentive Payment Types – Investor
Note: For details on incentives for PRA modifications with a TPP Effective Date prior to 3/1/2012, please refer to the Compensation Matrix on HMPadmin.com
Principal Reduction Alternative (PRA) Investor Incentive Payment
13 Making Home Affordable | February 2012
2MP Incentive Payment Types
Entity Payment Name
Servicer Completed Modification/Extinguishment Incentive
Servicer Success Payment
Borrower Borrower Success Payment
Investor Monthly Reduction Cost Share Payment
Full Extinguishment Payment
Note: No incentives will be paid unless the servicer has reported to the Program Administrator any required servicer or loan set-up data
14 Making Home Affordable | February 2012
2MP Incentive Payment Types – Servicer
Compensation Amount
$500
Frequency One-time payment
Timing Payable in the month the permanent modification becomes effective or in the month after the full extinguishment is reported
Conditions
• Permanent modification must be effective or the full extinguishment is reported
• UPB must be equal to or greater than $5,000
• Pre-modification scheduled monthly payment must be equal to or greater than $100
Note: The servicer cannot receive the $500 incentive for both a permanent modification and an extinguishment for the same loan.
Completed Modification/Extinguishment Incentive
15 Making Home Affordable | February 2012
2MP Incentive Payment Types - Servicer
Compensation Amount
$250 each year for up to three years
Frequency Accrued monthly for the first three years
Timing Payable annually for each year of the first three years after the anniversary of the month in which the permanent 2MP modification becomes effective
Conditions
• Borrower’s monthly second lien payment must be reduced by at least six percent
• First and second lien loan must be in good standing under HAMP or 2MP and not paid in full
• OMR must be received
Note: The pay-for-success fee does not accrue during the 2MP trial period.
Servicer Success Payment
16 Making Home Affordable | February 2012
2MP Incentive Payment Types - Borrower
Compensation Amount
Up to $250 each year for up to five years
Frequency Accrued for each month in which the borrower makes current payments on both first and second lien loans
Timing Payable annually for each of the first five years after the anniversary of the month in which the permanent 2MP modification became effective
Conditions
• Borrower’s monthly second lien mortgage payment must be reduced through 2MP by at least six percent
• First and second lien loans must be in good standing and not paid in full at the time the incentive is paid
• OMR must be received
Borrower Success Payment
17 Making Home Affordable | February 2012
2MP Incentive Payment Types – Borrower
Number of Months Accrued = 0
Total Anniversary Incentive = $0
Month 1 2 3 4 5 6 7 8 9 10 11 12
1MP Payment
One PMT Received
One PMT Received
One PMT Received
No
PMT
No
PMT
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
2MP Payment
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
One PMT Received
Accrued Borrower Incentive
0 0 0 0 0 0 0 0 0 0 0 0
Example 1:
Borrower misses two payments on the first lien loan and does not bring loan current.
18 Making Home Affordable | February 2012
2MP Incentive Payment Types - Investor
Compensation Amount
160 basis points multiplied by the unmodified UPB (less any partial principal forgiveness, if applicable) of the second lien converted to a monthly rate (divided by 12 months)
Equation: (160 basis points X unmodified UPB of second lien) / 12
Frequency Payable monthly beginning the month after official/permanent modification effective date
Timing Payable monthly beginning the month following the month the permanent 2MP modification becomes effective
Conditions • First lien modified under HAMP must be in good standing
• Neither the first nor second lien have been paid in full
• 2MP OMRs(2 OMRs) must be received
Monthly Reduction Cost Share Payment
19 Making Home Affordable | February 2012
2MP Incentive Payment Types - Investor
Compensation Amount
Paid $0.06 per dollar of the UPB being extinguished if the second lien is more than six months delinquent at any time during the 12 months prior to the date of the extinguishment, otherwise the following applies:
• $0.21 per dollar of the UPB extinguished for a CLTV less than 115%
• $0.15 per dollar of the UPB or extinguished for a CLTV of 115%-140%
• $0.10 per dollar of the UPB or extinguished for a CLTV greater than 140%
The CLTV is the ratio of the current total UPB of the HAMP modified first lien and the current total UPB of the unmodified second lien divided by the property value obtained in connection with the permanent HAMP modification.
Frequency One-time payment
Timing Payable in the month all required data relating to the second lien extinguishment is received by the Program Administrator
Conditions
The 2MP servicer must represent and warrant that the second lien has been released in compliance with applicable laws when submitting a request for payment.
Full Extinguishment Payment
20 Making Home Affordable | February 2012
HAFA Incentive Payment Types
Entity Payment Name
Borrower Borrower Relocation Assistance
Servicer Servicer Incentive
Investor Investor Reimbursement for Subordinate Lien Releases
Note: No incentives will be paid unless the servicer has reported to the Program Administrator any required servicer or loan set-up data
21 Making Home Affordable | February 2012
HAFA Incentive Payment Types – Borrower
Compensation Amount
$3,000
Frequency One-time payment
Timing Payable in the month the Short Sale/Deed-In-Lieu Loan Set-up is received after closing
Conditions
• HAFA Loan Setup transaction and Notification must board the HAMP Reporting Tool
• Short sale-property sale or transaction amount must be less than or equal to the sum of the final UPB amount and the total allowable costs amount
• The HAFA transaction must be reported in the HAMP Reporting Tool
Borrower Relocation Assistance
22 Making Home Affordable | February 2012
HAFA Incentive Payment Types – Servicer
Compensation Amount
$1,500
Frequency One-time payment
Timing Payable in the month the Short Sale/Deed-In-Lieu Loan Set-up is received after closing
Conditions
• HAFA Loan Set-up transaction and Notification must board the HAMP Reporting Tool
• Short sale-property sale or transaction amount must be less than or equal to the sum of the final UPB amount and the total allowable costs amount
Servicer Incentive
23 Making Home Affordable | February 2012
HAFA Incentive Payment Types - Investor
Compensation Amount
Up to $2,000; Investor receives $1 for each $3 of total mortgage related subordinate lien releases up to $6,000
Frequency One-time payment
Timing Payable in the month the Short Sale/Deed-In-Lieu Loan Set-up is received after closing
Conditions
• HAFA Loan Setup transaction and Notification must board the HAMP Reporting Tool
• Short Sale- Property Sale or Transaction Amount must be less than or equal to the sum of Final Unpaid Principal Balance amount and Total Allowable Costs Amount
• Subordinate lien holders must agree to release their liens and waive all future claims against the borrower
Investor Reimbursement for Subordinate Lien Releases
24 Making Home Affordable | February 2012
Course Objectives
This course will provide:
A comprehensive overview of MHA incentive compensation on the following programs: HAMP, 2MP and HAFA
Detailed information on incentives and accruals
• Guidance on Official Monthly Report (OMR) submissions and their impact on incentives
• Assistance in identifying anniversary incentives on monthly reports posted to the HAMP Reporting Tool
• A definition of interim month
• Guidance in managing servicer anniversary incentive inquiries
• A review of incentive compensation
• A list of MHA Resources
• A forum for questions and answers
25 Making Home Affordable | February 2012
Official Monthly Reports (OMR)
• Servicers must report loan activity for permanent modifications on a monthly basis
• OMRs report permanent modification’s previous month’s activity
• OMRs cannot be submitted until permanent modification boards in the HAMP Reporting Tool
• Reporting begins the first month AFTER the permanent modification is effective or the same month of a late submission loan setup
• Example: If permanent modification effective date is Feb 1st, OMR reporting begins March for February activity
• Due by the fourth business day of each month, however, the system accepts OMRs through business day eight
• Multiple OMRs can be submitted in the same month if corrections are needed
Continued …
26 Making Home Affordable | February 2012
Official Monthly Reports (continued)
OMRs are due even if a payment is not received during the prior month’s activity.
Receipt of the OMR directly impacts incentives where applicable.
• Reported LPI Date is used to determine borrower accruals if the borrower is current and if the borrower remains in good standing
• Servicer pay-for-success incentives disbursed only upon receipt of an OMR
• Borrower pay-for-performance incentives disbursed only upon receipt of an OMR
Continued …
Note: Servicers should reference data elements and definitions set forth in the appropriate Data Dictionary located on HMPadmin.com.
27 Making Home Affordable | February 2012
Official Monthly Reports
File layout includes 11 data fields:
1. HAMP Servicer Number
2. Servicer Loan Number
3. Last Paid Installment Date (LPI) as of month’s end
4. Unpaid Principal Balance (UPB) as of previous month’s end
5. Principal Payment Amount received for the previous month
6. Interest Payment Amount received for the previous month
7. Action Code
8. Action Date
9. Note Rate
10. Payment Effective Date
11. Principal and Interest Payment
28 Making Home Affordable | February 2012
OMR Example: OMR Reported Current
• June payment is received on time during June
• OMR submitted by fourth business day of July for June activity
• Unpaid Principal Balance (UPB) = UPB at June month end
• Principal Payment = full principal payment(s) received during June
• Interest Payment = full interest payment(s) received during June
• LPI Date (due date of the last payment received in June) = June 1, 2010
• Compensation is dependent on whether receipt of OMR is paid on-time in July (i.e., Payment Reduction Cost Share, where applicable) and Borrower Pay for Performance AND Servicer Pay for Success Payment accruals advance one month
29 Making Home Affordable | February 2012
OMR Example: OMR Reported Delinquent
• June payment is not received by June month end
• OMR is submitted by fourth business day of July
• UPB = UPB as of May month end
• Principal Payment = $0.00
• Interest Payment = $0.00
• LPI Date after Modification = May 1, 2010
• Borrower Pay for Performance accruals are not credited for June and do NOT advance one month as LPI Date reported is not current
30 Making Home Affordable | February 2012
OMR Example: OMR Prepaid
• June and July payments are made in June
• August payment is not received by July month end
• OMR is submitted by the fourth business day of July
• Principal Payment = sum of principal payments made in June
• Interest Payment = sum of interest payments made in June
• LPI Date = July 1, 2010 (indicates prepaid)
• OMR is submitted by fourth business day of August
• Principal Payment = $0.00
• Interest Payment = $0.00
• LPI Date = July 1, 2010
• Compensation dependent on whether receipt of OMR is paid on-time in July and August and borrower pay-for-performance AND servicer pay-for-success accruals are credited for each month
31 Making Home Affordable | February 2012
OMR - Impact on Monthly Compensation
• HAMP Reporting Tool validates OMRs to ensure current LPI date before accruing borrower pay-for-performance compensation
• Servicer pay-for-success payment are dependent only on receipt of the OMR
• Note: LPI Date does not have to be current
• Borrower compensation associated with any period of delinquency is not recoverable
• LPI dates reported 90 days or greater result in the borrower’s loss of good standing and the loan disqualifying, thus impacting borrower/servicer compensation
32 Making Home Affordable | February 2012
OMR - Impact on Anniversary Compensation
• Must receive an OMR to trigger anniversary payments
• System disburses cumulative accrued balances applicable at anniversary period
• Loan must be in good standing and not paid in full
• Late submissions on an anniversary are treated the same as ongoing, permanent loans
33 Making Home Affordable | February 2012
OMR Example: Servicer Anniversary Incentive Report for HAMP
Servicer Anniversary
• Anniversary Period April 2010
• Borrower LPI was current through life
• Monthly values = $83.3333 and Investor Cost Share = $100.00
• OMR received on Anniversary; system disburses current accrual balances
Accruals Brwr Mo. Brwr Cum.
Srvcr Mo. Srvcr Cum. Inv CS
March $83.3333 $916.6666 $83.3333 $916.6666 $100.00
April $83.3333 $1,000.00 $83.3333 $1000.00 $100.00
April Disbursement ($1,000.00) ($1000.00)
May $83.3333 $83.3333 $83.3333 $83.3333 $100.00
34 Making Home Affordable | February 2012
Accessing Servicer Anniversary Incentive Reports
Step 1: Log in to HAMP Reporting Tool at https://hamp.lpsappliedanalytics.com/
Step 2: Click on the “Reports” Tab
Step 3: Click on the “First Lien Cash Payment Summary” Link
Continued …
35 Making Home Affordable | February 2012
Accessing Servicer Anniversary Incentive Reports
Step 4: Log in to HMPadmin.com
Step 5: Click on HAMP Loan Reporting Tools and Documents
Continued …
36 Making Home Affordable | February 2012
Step 6: Click on File Formats
Step 7: Scroll down and click on HAMP Cash Payment Summary Column Headers
Accessing Servicer Anniversary Incentive Reports
Continued …
37 Making Home Affordable | February 2012
Accessing Servicer Anniversary Incentive Reports
Step 8: Copy and paste the headers into the Cash Payment Summary spreadsheet
Step 9: Identify specific program incentive type fields
38 Making Home Affordable | February 2012
Managing Anniversary Incentive Inquiries
Servicer Initiates Inquiry
• Inbound phone calls/emails
• Servicer Inquiry Form posted on HMPadmin.com
• Email [email protected]
Inquiry Scenarios
• General anniversary incentive inquiries
• Servicer loan specific inquiries
• Loan level incentive compensation disputes
MHA Teams Managing Servicer Inquiries
• HAMP Solution Center
• Servicer Integration Team (SIT)
• MHA Operations Analyst
• Compensation Inquiry Team
39 Making Home Affordable | February 2012
HAMP Incentive Inquiry Request Form
40 Making Home Affordable | February 2012
The time between the final trial period month and the month in which the modification becomes effective –is defined as the interim month.
For example, if the last trial period month is March the borrower would not be required to make any payment during April, and the modification would become effective, and the first payment would be due, on May 1st.
Neither the borrower nor the servicer will be entitled to accrue incentive compensation for the interim month for the borrower and servicer anniversary based incentives if the borrower does not make a trial period payment during the interim month.
Application of the Interim Month
41 Making Home Affordable | February 2012
Servicer Anniversary Incentive Compensation
Anniversary Incentive Compensation Essentials
• Maximum servicer anniversary incentive is $1,000 ($83.3333*12)
• Incentive does not accrue for the interim month when a permanent modification is established utilizing “skip-a-pay” option
• Currently, system functionality does not permit corrections of historical OMRs
• HAMP Reporting Tool retroactively updates monthly incentives upon submission of official corrections
• Inquiry process instructions and the general incentive inquiry form are located on HMPadmin.com
• Loan-level disputes must be submitted to [email protected]
Continued …
42 Making Home Affordable | February 2012
Servicer Anniversary Incentive Compensation (continued)
Anniversary Incentive Compensation Essentials
• OMRs must be reported in the anniversary month to trigger incentive payments
• Funds disbursed to servicer of record; reporting transfer in anniversary month results in funds disbursed to transferee
• Borrower anniversary accruals disbursed to “Borrower-specific” account if separate from “Servicer-specific” account
• Official cancels result in draft back of all disbursed funds
43 Making Home Affordable | February 2012
Borrower Anniversary Incentive Compensation
Borrower Anniversary Incentive Specific Compensation Essentials
• Borrower incentives are to be applied to principal as a curtailment
• Borrower incentive does not accrue for the interim month when permanent loan modification is established utilizing “skip-a-month” option
• Maximum borrower benefit per year is $1,000 ($83.3333*12)
• Borrowers accrue monthly incentives only in months the LPI date is current
• Servicers are encouraged to display borrower accrual incentives on the monthly mortgage statement
44 Making Home Affordable | February 2012
Additional MHA Support
MHA Support Resources
Compensation Inquiry Team
Servicer Integration Team [email protected]
45 Making Home Affordable | February 2012
Questions?